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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 15,000+ 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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How the Beneish M-Score Keeps You Cognizant of Earnings Manipulation

Earnings manipulations are one of the more sinister aspects of financial accounting. While it isn’t prevalent, it is an aspect of investing to be aware and protect ourselves, if possible. The Beneish M-Score is a formula we can easily calculate that allows us to determine the likelihood of earnings fraud.

The Beneish M-Score correctly predicted the fraud that Enron was committing, but unfortunately, no one on Wall Street was listening. The formula includes eight variables to help us determine manipulation.

In today’s post, we will cover:

  • What is the Beneish M-Score?
  • Understanding the Elements of the Beneish M-Score
  • Real-Life Examples of the Beneish M-Score In Action

Ok, without further ado, let’s dive in.

What is the Beneish M-Score?

According to Investopedia:

“The Beneish model is a mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. It is used as a tool to uncover financial fraud.

The variables are constructed from the data in the company’s financial statements, and once calculated, create an M-Score to describe the degree to which the earnings have been manipulated.”

The formula was first introduced by Professor M. Daniel Beneish of the Kelley School of Business from Indiana University in 1999. He published the paper “The Detection of Earnings Manipulations.”

The model that Beneish created is a mathematical model based on financial ratios and eight variables that attempts to identify whether a company has manipulated earnings.

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Circle of Competence: Maximizing Results by Identifying Biases and Strengths

Understanding one’s circle of competence helps you avoid problems, identify strengths, find opportunities for improvement in any field, and help you learn from others.

Warren Buffett is often quoted when any discussion of a circle of competence is begun.  He has used this description to help investors focus on the areas they knew best. He first shared his thoughts on this concept in his 1996 Letter to Shareholders:

“What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

A circle of competence is often related to investing. Still, it encompasses much more than that, often a circle of competence relates to our jobs, hobbies, learning at school, and many more.

In today’s post, we will discuss:

  • What is a Circle of Competence
  • Warren Buffett and the Circle of Competence
  • How to Define Your Circle of Competence

Ok, let’s dive in and explore more about the circle of competence.

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7 Cures for a Lean Purse: Money Secrets from the Ancients

Unfortunately, we live in a country where many people do not have a lean purpose, and in all actuality that have an absolutely ton of debt that is prohibiting them from potentially ever reaching financial autonomy.  But don’t worry, I’m here with a chapter recap of The Richest Man in Babylon’ to teach you the 7 cures for a lean purse!

Now that I have finished Rich Dad, Poor Dad, I am on to my next book!  The thing that’s always attracted me to ‘The Richest Man in Babylon’ is the same thing that made me read ‘Rich Dad, Poor Dad’ – it’s a lot about the mindset of creating wealth for your family and some of the baby steps, per se, to make sure that you’re on the right path!

As I mentioned, the first chapter that I am recapping in ‘The Richest Man in Babylon’ is the 7 cures for a lean purse.  Unfortunately, debt is way more common in America than what it should be, and most Americans are living under a boulder of bone crushing debt.

Just as with investing we talk about the Debt/Equity ratio for a company, the Debt/Income ratio is very important for an individual investor so you know if you can cover your liabilities at any point in time.  The average household debt in the US is $137,063 and the median household income is only $61,372, so that means that the debt is more than DOUBLE the income – that is no Bueno my friends!

So how can you change that?  Well, George Samuel Clason, author of ‘The Richest Man in Babylon’, recommends that we start with these 7 cures for a lean purse!  So, what are we waiting for?  Let’s check them out!

1 – Start Thy Purse to Fattening

Pay yourself first!  It’s really just that simple.  Clason recommends that if you’re paid 10 coins then you should try to only live off of 9 of those coins and save the last coin.  Of course, we don’t get paid in coins, but the logic is the same.  Always try to save at least 10% of your income.  And I mean AT LEAST that as a very minimum.

The more that you can save, the faster that you’re going to reach financial autonomy.  Let’s do a quick example.  I just said that the average household income is $61,372, so 10% of that is $6,137/year of savings. 

If you were able to save 10% of your income and invest it at an 8% return (the average since 1950 is over 11%), as Clason suggests, you’d have nearly $700K in 30 years!  But if you could just increase that up to 15%, your total now is well over $1 million after 30 years! 

You can see how the total amount really just continues to climb at an exponential rate solely based off how much you can invest!

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IFB152: Hot Take – Check Your Portfolio Daily

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 Investing for Beginners podcast. This is episode 152 tonight we have a special guest with us. We have Andy Schuler with us tonight. Andy is a regular contributor to Andrew’s blog, einvesting for beginners. Andy has a lot of great articles on there, some fantastic ones that we’re going to talk a little bit about some of those tonight. So, Andrew, would you like to say hi to everybody?

Andrew (00:58):

Andrew or Andy? I mean, I guess we could go by both, right? We can go by with, Oh, welcome on Andy. I did want to ask you’ve had some great posts lately. Something that clicks with my passions. And it kind of relates not just to personal finances or investing but to a lot of different endeavors. And that’s this idea of the importance of tracking. So talk about that for a little bit and tell us your thoughts and why you’re so adamant about tracking things.

Andy (01:30):

Yeah. So tracking is, I think honestly, it’s the best way you’re probably ever going to get results just in anything. I’m a very firm believer in smart goals, specific, measurable, attainable, realistic, and sensitive. Like, and I feel like the tracking portion of actually being able to fact check how you’re doing and see your progress is the best way for you ever to make any sort of improvements in what you’re doing. So, I mean, my, I’ll say my, my introduction came to it actually when I was a kid. My dad got me an Excel at a very, very young age track and baseball stats or attracted strikeouts and singles RBIs, you know, just any, any stats that I could and just try to figure out, you know, it was more or less just for me just to see how I was doing. I could see how I did from one game to the next or at the beginning of the season to the end of the season.

Andy (02:32):

And I just liked identifying trends, and I think it picked out for me when when I was in college or ballooned to a pretty, pretty high weight in college. So I know a lot of people talk about the freshmen 15 I think I had like the freshmen 50, I don’t know if it was quite that high, but I mean it was, it was pretty obnoxious. So like if, if you’re ever looking for how to lose weight, I guarantee I can find your information that says one thing is good and doing that same thing is also bad. So I felt like the only way for me ever truly to find out what would be to track. So I mean, I would track my food and Excel. I would; I would weigh out my food. So I know I was getting exactly, you know, six ounces of chicken or I was getting, you know, if I was going to put ranch on something, I was getting the exact amount of, you know, one serving of ranch.

Andy (03:35):

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A Complete Rich Dad Poor Dad Summary with Chapter Reviews

Boom!  I finally did it.  I finished Kiyosaki’s book and now it’s time for my ‘Rich Dad, Poor Dad’ summary.  Are you as pumped as I am?

If you’ve been following along with my review then you know that this has literally taken weeks, but I promise you the book isn’t that hard or long to read – I’ve just been trying to space out the Chapters to write different posts each week and to try to really reflect on some of the information that he bestowed onto me before writing my recaps! 

So far, I have written six chapter summaries, and I will hit on a few of the very high-level lessons that I took away from each chapter!

Why a Scalable Income is Better Than an Hourly Wage for Wealth Building

Well, it was simple – “The Rich Don’t Work for Money”

This chapter was really as simply as it sounds – if you want to be rich, you’re not going to be working for money.  But what exactly does that even mean?  It’s simple if you really think about it but it’s hard to wrap your mind around at the same time…

If you have an annual salary of $50,000 or say that you make $15/hour – the amount of money that you can make is capped.  It’s either capped on an annual basis at $50,000 or capped on an hourly basis at $15/hour.  Sure, you can work more hours if you’re the hourly worker and increase your income, or you can add a second job or a side hustle, but the fact of the matter is that you’re really capping your earning potential.

If you can instead work in a way that allows you to have a scalable income, your earnings potential is endless!  Think of it in an investing mindset:

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What the Data Tells Us About Momentum Stocks: Are They Good Buys?

As a new investor, it can be really easy to get caught up into defining what sort of investor are you – growth? Value? Momentum? It can be confusing and all it does is add stress to the new investor but don’t worry, I’m here to decode the BS and breakdown if momentum stocks are good buys or not!

First off – what even is a momentum stock?

Investopedia defines Momentum Investing as “a strategy to capitalize on the continuance of an existing market trend. It involves going long stocks, futures or market ETFs showing upward-trending prices and short the respective assets with downward-trending prices.”  

In other words, you’re selling your laggards that haven’t performed very well and buying more of your companies that have performed extremely well.  At first glance, I can see two different mindsets to this:

1 – well, of course I want to get rid of my bad stocks and buy more of the good ones, right?

2 – wait, isn’t this the definition of buying high and selling low?

In a way, these are directly contradictory of one another and also the same thing.  As a value investor, sometimes it’s hard to see and understand other strategies, but the core of a momentum investor is that they’re trying to ride the momentum of a stock all the way up until that momentum slows down.

Trading Momentum: Is It Like Gambling?

In a way, it’s like you’re trying to get a hot hand at a casino.  You want to keep playing that hot hand until you eventually lose and then once you lose a hand, cash out.  Ride it up, get a “heat check” as you might hear in sports, and then cash out your winnings.

In theory, I actually like this sort of investing strategy a lot, but to me it seems more like trading than investing, right?  Maybe you disagree, but I think a really strong performing company like Apple or Visa is just that – a strong performing company.  I wouldn’t say that they have an abnormally high amount of momentum, per se, that is driving up the stock, so would that mean I wouldn’t invest? 

Does this mean that I only invest in companies for a short period of time while the momentum is high?  These are all questions that I had when I first was learning about momentum investing and I want to share my knowledge with you all!  So, let’s start with the basics – if I was to get into momentum investing, how would I even start?

There are multiple different strategies that you can implement if you want to partake in momentum investing.  Per the Corporate Finance Institute, the process for being a momentum investor can be summarized in three steps:   

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Second-Order Thinking: A Critical Component of Smart Investing

“Failing to consider second- and third-order consequences is the cause of a lot of painfully bad decisions, and it is especially deadly when the first inferior option confirms your own biases. Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored.”

Ray Dalio

Your ability to think through any problems to the next level, i.e., second, third, fourth, etc., or what is referred to as second-order thinking is an incredibly powerful tool that will supercharge your thinking.

Investing is an incredibly difficult game to play, as there are so many different variables, and the ability to think beyond the first-order such as I like this company will go a long way towards your long-term success as an investor.

In today’s post, we will cover:

  • What is Second-Order Thinking?
  • How to Solve Problems Using Second-Order Thinking
  • Improving Your Ability to Think
  • Ray Dalio and Second-Order Thinking

Ok, let’s dive in and learn how second-order thinking can improve our decisions.

What is Second-Order Thinking?

In the remarkable book, The Most Important Thing, Howard Marks first brought to my attention the concept of second-order thinking, which he refers to as second-level thinking.

“First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.” Second-level thinking is deep, complex, and convoluted.”

First-order thinking is quick and easy, not a lot of effort is required to conclude. It happens when we are looking for an answer that solves the problem immediately without thinking through the consequences. For example, I am thirsty, so I must get a beer to quench my thirst.

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This Book Reveals the Secret Behind Warren Buffett’s Coca Cola Investment

When you look through the history of Warren Buffett’s career, you see a few key decisions that fueled so much compounding of capital: GEICO, American Express, the Washington Post… and of course, Coca Cola. In fact, Warren Buffett’s Coca Cola investment represented up to 40% of his portfolio in 1990, and so to say it contributed to Berkshire’s success is an understatement.

Everybody likes to postulate about why Buffett picked Coca Cola, but I wanted to dig deeper. Like with researching stocks and their financials, I like to go to the source.

So I picked up a fantastic book that chronicled the CEO of Coca Cola and his (and the company’s) journey to success when Buffett first picked up Coke stock. That CEO was named Roberto Goizueta, and the book called I’d Like to Buy the World a Coke by David Greising chronicles it all.

To be more specific, I’d Like to Buy the World a Coke covers CEO Goizueta’s life from his upbring in Cuba, to his dramatic escape to the United States, to his rising up the ranks from engineer all the way up to the top, and to the fantastic results he led Coca Cola through until his death in 1997.

Roberto Goizueta drew large fanfare during his reign as Coca Cola’s CEO, after all, in a few short years after taking over the CEO spot and then Chairman, he led the company to such success that shares of its stock quadrupled

Goizueta managed this while also both continuing to grow the dividend consistently and allocate more earnings to be reinvested into the business, which helped Coca Cola achieve absolute global dominance in the soft drink space, especially over rival Pepsi.

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The History of Economic Prosperity in the United States

The United States has a very long history of economic prosperity and it seems like most of those strong times occur right after a very scary market downturn like the tech bubble, the housing market bubble and potentially the coronavirus!  But to be quite honest, talking about how great America is really makes me really freaking proud to be an American! 

I can’t say that I am recommending that you watch, ‘Team America – World Police’ but if you have seen this movie, then chances are you are singing the exact phrase that I sing all day on the Fourth of July, and really just anytime that I’m feeling a little bit patriotic!

But before I go off the rails too far, I’m going to keep us on track because not only do I think economic prosperity is important for all of us to understand as investors, but I think it’s important for us to understand as Americans as well, and if you live in another country then you can easily use the links that I am going to reference to learn more about your country, too!

So first off, what even is economic prosperity? I think that WDM describes it best when they say:

“Economic prosperity is the key element to quality of life and is also necessary for the nation to be competitive in the world economy. As local economies move from production-based to ones based on creativity and innovation, they must grow in ways that strengthen industries, create good jobs and encourage economic investment. To increase wealth and living standards, the economy must promote and sustain diversity, innovation, competition and entrepreneurship.”

What does that really mean?  In essence, it’s really meant to be an all-encompassing facet to judge the long-term viability of the economy.

So, what were some of the most prosperous times throughout history for the economy of the US?  I’m not going to go into all of them, but CNN Business wrote a really good article highlighting some of the most prosperous times in the US and I just want to hit on some of the highlights!

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7 Ways to Prioritize Saving with a Budget Calendar

Have you ever heard of a budget calendar? Personally, I use one nearly every single day of the week and it saves me a ton of time and money, as well as keeping me on track with my budget without physically having to go in and track my expenses every single day. 

And not only does it save me time, but there’s a pretty cool trick with using one that increases my annual savings at a pretty drastic rate, but don’t worry, I’ll show you that too!

I think that the most important task for a budget to accomplish is to make it find the perfect blend of being simplistic and forcing you to track your expenses.  Personally, I feel that tracking your expenses is the best way to make sure that you truly understand where your money is being spent and then you’ll be able to effectively analyze if that money is being spent on needs or wants.  If you’re not tracking it yourself, then you’re not getting enough into the details to be able to really make any real changes.

But at the same time, your budget needs to be simplistic enough so that you actually use it.  If it takes hours and hours, you will simply stop using it altogether then that’s a complete waste of time, effort and money. 

So, it’s all about finding that perfect blend – and that’s why I created Doctor Budget!  Doctor Budget causes you to track, but in the way that you can truly input all of your spending for an entire month in less than 15 minutes. But even with tracking being so quick and easy to do, it still requires a little bit of time and effort, so that’s why I created this budget calendar as an “add on” tab that will be included in Doctor Budget, and sent out to all of you current Doctor Spreadsheet users as well!

So, what exactly even is a budget calendar, and why is it useful?

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