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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 7,200+ 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.

How to Find Total Liabilities on the Balance Sheet

Many companies actually don’t explicitly post Total Liabilities on their balance sheets. It’s kind of deceiving and can be a disservice to novice investors. Especially since some of the most important ratios I talk about like Debt to Equity implement Total Liabilities.

total liabilities

Here’s a great question from one of my Value Trap Indicator package clients:

“I’m 21 years old and am looking to buy stocks and build my investment portfolio. I’ve recently purchased the Value Trap Indicator book, and am reading through it now! It’s definitely an easy to understand book that simplifies the stock market into digestible terms.

I’m having trouble with one thing in particular,

When calculating the P/B ratio, it uses the Book Value = Total Assets – Total Liabilities.

When calculating the Debt to Equity Ratio, it divides Total Liabilities by Shareholders Equity.

I’ve attached Honeywell (HON)’s financial statement, and I’m confused as to whether to use “Total Current Liabilities” or “Total liabilities, redeemable noncontrolling interest and shareowners’ equity”. Which do I use for each ratio? What’s the difference?”

[click to continue…]

Health Savings Account: HSA for Beginners

Statistics show that, in 2016, deductibles through the different plans of the Obamacare Act (Gold, Silver, and Bronze) increased 8.4% or $265 on average.  Also, in some states, the average increase skyrocketed to $1,395.

Besides the fact that this is hardly an affordable health insurance, these high deductibles have increased what the average family should pay out of its pocket to receive health coverage. So, instead of lowering the costs, the Obamacare Act has driven the insurance costs up and has restricted access to lower-income families.

With Affordable Care Act deductibles and premiums skyrocketing, Health Savings Accounts are becoming increasingly valuable. In fact, HSAs are one of the fastest-growing medical care plans because you are actually managing a savings account for your health. Also, HSAs serve as a reimbursement program and most employers agree on contributing to these tax-advantaged medical plans as an additional employee benefit.

health savings account hsa

So, if you face financial hardships or are simply looking for an affordable health insurance plan and you don’t know how much money you should save and how much money you can spend on the plan, this HSA for beginners guide will, hopefully, answer all your questions.

What is an HSA?

A Health Savings Account (HSA) is a tax-exempt savings account that allows you to contribute and withdraw funds for your medical expenses. By setting aside a specific amount per year on your HSA, you have instant access to the amount of money you need to cover for qualified medical expenses. The money that you contribute is tax-exempt because the IRS considers HSAs as health insurance plans for tax purposes, and therefore, any income received from a health insurance plan is tax-free.

Which expenses are covered by an HSA?

The HSA is designed to cover your own medical expenses as well as the expenses of your spouse and children, provided that these expenses qualify for the HSA account. Such qualified expenses include doctor visits, dentist payments, MRIs or scan CTs, home care, over-the-counter drugs, weight-loss supplements, nutritional supplements, and vitamins prescribed by a medical practitioner, drug prescriptions, emergency treatment, mobility aid, medical trips and medical equipment. Also, psychological treatment, eyeglasses, chiropractic and physical therapy services, hearing aid, and quit-smoking programs are covered.

Who can contribute to my HSA?

Normally, you are the main contributor to your HSA account. However, one of the main reasons that HSAs are attractive is the employer contributions as an additional benefit. Your employer can match your HSA contributions up to a certain amount, let’s say the first $500 you put into the account. In that way, you get $1,000 matched annually. In case you have more than one HSAs, or your employer contributes to your HSA, make sure not to exceed the maximum allowed contribution for the year. [click to continue…]

Investing in MLP Closed End Funds

Master limited partnership closed end funds, commonly known as MLP CEFs, are hybrid MLP companies that operate in the energy sector. Most MLP closed end funds are formed by larger energy companies that seek to restructure their low growth assets by replacing debt with equity.

mlp closed end funds

If you are an income-oriented value investor, MLP CEFs are an attractive investment as they combine a high yield, high distributions, and a tax-deferred income. In addition, if you keep your MLP CEF in a qualified retirement account and you invest in multiple MLP funds, you get the investment exposure you want, and you avoid the K-1 tax hassle.

The tax advantage of the MLP CEFs

In fact, the MLP closed end funds combine the advantages of corporations and partnerships because they issue publicly traded equity interests (units) but pay taxes as limited partnerships. To better understand the tax advantage, consider that most equity funds are RICs (regulated investment companies), which allows them to pass the capital gain taxes and income to investors and avoid taxation.

However, RICs cannot invest more than 25% of the portfolio in MLPs. Therefore, most MLPs are organized as C-corporations to invest exclusively in MLP closed end funds and pay the 35% corporate income tax.

The tax advantage of the MLP CEFs is effective if they earn at least 90% of their income from oil and gas products as well as natural resources that pertain to the section 613 of the federal tax code. So, if you are seeking exposure to the energy sector along with a tax-deferred income, MLP closed end funds can be worth considering.  [click to continue…]

The Magic of Dividend Champions

Dividend-paying companies are the backbone of value investing. Besides the fact that they are consistently delivering a dividend payment, most of the time they are also raising their annual dividend payment.

Also, although most investors believe that great dividends come with expensive price tags, the truth of the matter is that often the market cap is irrelevant of the dividend payment.

dividend champions

What is a Dividend Champion After All?

Dividend champions are companies that have raised their dividend payment for 25+ consecutive years and are different than dividend aristocrats, which are all members of the S&P500 index.

The dividend champions is a list of 98 companies, released by the DRiP Investing Resource Center, which includes large caps and mid-caps that are 25+ consecutive dividend increasers. The list also includes the special dividends paid and information on which companies are offering a dividend reinvestment plan (DRIP).

Dividend Champions Are Strong, Yet Not Necessarily Large

Large caps are more likely to deliver a dividend in a consistent way. Why? Because they have a global brand name, and they generate strong economic results with the potential to attract more investors. As more people are trusting their money with a stock, the price of the stock rises.

However, in practice, there are many overvalued stocks that trade way above their fair value exactly because investors have massively believed in them.

On the other hand, evidence shows that there are mid-cap companies with the potential to even outperform the large caps in their dividend payments. Don’t forget that delivering a dividend is a combination of three factors: strong earnings, low debt, and growth.  [click to continue…]

Hedge Your Portfolio Like a Billionaire

Did you know that you can hedge your portfolio just like a billionaire? In this post I’ll lay out a simple strategy used by large banks, Fortune 500 companies, hedge fund managers, and billionaire investors across the globe.

This is a strategy, that with a little creativity, you can employ in your portfolio as well! It shouldn’t be a secret from which only the rich few can benefit.


[This is a guest post from Patient Wealth. His bio: I live in the Mid Atlantic region with my wife and children.  I am a finance manager for a Fortune 100 Company with over 10 years experience and have an MBA and CPA – but my true passion is investing!]

Before I get into some of the details let me give you the basic idea. What is hedging? Hedging is simply managing the risk of your portfolio through taking a position which makes money when your portfolio decreases in value. This allows an investor to limit losses.

Hedge Funds

You may have heard about hedge funds or hedge fund managers like Bernie Madoff. Or how about George Soros who famously bet against the British Pound? And what about Long-Term Capital Management which went down in flames and almost brought down the global banking system with it?

But hedge funds may or may not employ the strategy that I will be discussing. I want to deal with this first to dispel any misconceptions that may come to mind when talking about hedging.

The term “hedge fund” is loose jargon to refer to an investment fund which is only available to qualified (wealthy) investors as defined by the federal government. They use many many techniques, including but not limited to hedging, in order to execute their strategies.

But these funds can really be doing anything and are not a homogenous group at all. So don’t think about hedge funds when thinking about the strategy of hedging. They are two different things.

So What is a Hedge?

A hedge is simply a way to lessen your risk. Let’s take an example that most of us can identify with. Let’s say there is a trucking company that has contracts to ship goods across the country. The trucking company makes great money and provides good service to their customers. Everyone is happy.

But nothing in the contract allows for an adjustment in the cost of shipping based on the price of diesel.  [click to continue…]