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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 33,000+ 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.




A Guide to Investing for Beginners— Your Path to Financial Freedom

“Investing is the process of laying out money now to receive more money in the future.”

Most people think they need thousands or millions of dollars to start investing. The good news is you don’t. We will discuss how to start investing if you are new to the whole idea.

There are some simple steps to follow to get started as early as today. And the sooner you start, the sooner you arrive at your destination.

In today’s post, we will learn:

  • Why Invest in the Market
  • Things to Consider Before Starting
  • 6 Perfect Investments for Beginners

Okay, let’s dive in and learn more about investing for beginners.

Why Invest in the Stock Market?

For most of us, retirement is a long way off, which we think we will do later. But today is the best time to start, and most people put it off, either because they fear what they don’t know or feel they don’t have enough money to start.

The stock market is one of the greatest places to create wealth. Of course, starting or owning your own business is a great way too, but that is not for everyone, where the stock market is open for all.

Starting to invest in the stock market seems scary and full of noise, confusion, and the potential to lose lots of money.

But investing is like anything else; once you learn the basics and understand the reasons behind the behavior, it all makes a lot more sense.

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How Can I Better Utilize Short-Term Investments?

Do you have some extra cash laying around in a savings account? If so, you should consider a short-term investment strategy to allow your money to grow.

Do you have some extra cash laying around that you are looking to invest, but you may be a little passive on the stock market? Or, maybe you don’t need the money right this second, but you know it will be a possibility soon. These are two prime scenarios for short-term investments.

What exactly is a short-term investment? In most cases, this is an investment that is meant to last anywhere from one day up to three years. There is no exact science to a timeline, but typically the money you invest is something you plan to need or use sooner rather than later.

For the IRS, a short-term investment is anything the you hold for less than one year, as far as capital gains are concerned. Anything over one year would fall into the long-term investment category for capital gains. An important part of a short-term investment is making sure you can liquidate to cash quickly. Meaning your investment can be turned into cash in your savings account within hours or up to a few days.

While the stock market has historically given 10 percent annual returns, that math becomes much less volatile over longer periods of times. If you try to get in the stock market for a short period or even day trade, there is far more risk involved and your chances of losing are much higher. Some experts have gotten rich doing this, but some beginners have lost it all the same way.

If the situation is right, short-term investments can be a great option, even though the returns are typically less than a longer-term investment. Remember, anything is better than the garbage interest rate you are getting by your money sitting in a savings account.

  • When to Utilize Short-Term Investments
  • Types of Short-Term Investments
  • When Not to Utilize Short-Term Investment
  • Summary

SHORT-TERM INVESTMENTS: Definition, Examples, and Banks

When Should you Utilize Short-Term Investments?

Short-Term Investments are not the answer for everyone. Remember, these returns will end up having far less returns than a long-term investment. What’s the benefit of using short-term investments then, you may ask? If you are in a situation where you need access to liquid cash quickly, then this is your solution.

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No-Nonsense Financial Planning for Beginners (Pt2: Income)

Ask anyone who’s gone from making a small income to making a lot—saving and investing becomes SO much easier when you have a higher income.

One of the problems with financial planning for beginners is that many start picking the low hanging fruit, cutting large expenses, but then stop there. The hard reality is, until you get your income up, progress in your finances stays pretty difficult and a slow grind.

In this post, part 2 of our No-Nonsense Financial Planning Guide, I’ll cover some simple and tangible ways to get your income higher.

Another harsh reality: you can’t save a sinking ship if there’s a hole in it.

So if you haven’t read through part 1 and gotten your expenses in check, start there and then circle back around.

Now to the keys of earning a higher income.

The foundation you need to establish within yourself comes down to three important pieces:

  1. Capability
  2. Confidence
  3. Hustle

The great thing is that ANYBODY can work on these, whether you’re a part-time cashier or Fortune 500 exec. Improvement in these places, which starts within, will result in higher (and sustainable) future income to make real progress on your path to financial freedom.

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IFB217: Investing in Carbon Credits and Useful Metrics for Beginners

Welcome to the Investing for Beginners podcast. In today’s show, we discuss:

  • What kinds of stocks or investments can you put in a Roth IRA?
  • How does investing in carbon credits or green investments work?
  • What kind of metrics should beginners start with, and how can they help you learn about the finanicials of a company?

Today’s show is sponsored by:

Jordan Harbinger Show

For more insight like this into investing and stock selection for beginners, visit stockmarketpdf.com

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Transcript

I love this podcast because it crushes your dreams and getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern with a step-by-step premium investing guide for beginners. Your path to financial freedom starts now.

DAVE Alright folks, welcome to investing for beginners Podcast. Today we have episode 217. And we’re going to go back and answer some great listener questions we got recently. So without any further ado, go ahead and read the first question.

So I have Andrew and Dave, I recently opened up a Roth IRA through fidelity. Is the investing strategy, any different with a Roth than it is with buying stocks with an individual brokerage account? Appreciate your thoughts, PS. Dave, I’m a big baseball fan and X player myself, so keep crushing the baseball analogies?

Absolutely, we’ll do. Thank you for the softball pitch. And we’re going to attempt to hit this baby out of the park. So yeah, so Andrew, what are your thoughts on a great question about the Roth IRA?

ANDREW All offseason fun, the strategy part? So like the logistics wise? The short answer is there’s not much difference, maybe more of the long answer, there’s a little bit of taxes, but you get if you’re using a reputable us broker, one of the big names Fidelity, Schwab, Merrill, anybody like that, they will send you the forms automatically. And you can just for those to your tax accounting, put on TurboTax, whatever. So in that regard, the logistics of Roth versus a regular brokerage account, are not all that different. Like I said, the taxes are different. And so there are some people who will look at the differences in taxes and kind of use that to their investing strategy.

And I think that can be smart in certain situations, and it really depends on yourself. So one idea of that could be if you have stocks that you’re buying that do not pay a dividend, then you put those in your regular brokerage account. And if you have stocks that do pay a dividend, you put them in your Roth. The reason for that is the dividend tax, you don’t have to pay taxes on your Roth. So any taxes from dividends, you won’t have to pay on those stocks that pay a dividend. So that’s one idea.

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Want to Beat the Stock Market? Let’s Get Those Momentum Funds at Work!

If you ask me, one of the biggest secrets to investors is the way that ETFs can be used to their benefit to really increase their gains. And not only the normal ETFs that come to mind like SPY and VOO, but some others like MTUM that track the MSCI USA Momentum Index. So what do you say, let’s dive in and get those momentum funds at work!

Momentum Investing is a unique strategy that might not be known to all, but essentially what you’re doing is investing in companies that have seen a nice uptick lately in their share price and have positive momentum. Seems pretty simple, right?

Gary Antonacci went through and tested this strategy by comparing companies that were in the top ⅓ for momentum and compared them to the bottom ⅓. Turns out that the top ⅓ outperformed the bottom ⅓ by .4% from 2012 back to 1801.

That might not sound like a massive outperformance, but .4% can greatly add up over the course of time! And guess what, I actually have some data that can show you that .4% is even less than we have seen in recent history!

Truthfully, if we were going to try to become a momentum investor, I would challenge the word “investor” and say that truthfully we’re more so being “traders”. Buying in and out of stocks solely based on what has happened to the share price in the recent days is nothing more than speculation, even if it’s backed by data.

But what if there was a way to long-term invest in momentum? A way that has pretty consistently beaten the stock market? Well guess what…

You’re in luck!

The way that you can do this is by investing in an ETF called MTUM.

That’s it. Go dump all your money into that ETF right now and call it a wrap! Obviously (hopefully), I am kidding. Let’s dive in a bit and study the ETF a bit more.

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Why It’s Important to Continue Investing in You

Sometimes the first person everyone forgets is themself. Make sure that doesn’t become you and you continue to invest in yourself.

In the events of everyday life, sometimes the easiest person to forget is you. We often find ourselves so wrapped up in taking care of other people or other things, that we often put our own personal needs on the backburner.

Trust me, if you’re young, you need to get ahead of this now while you still can. Investing in you gets absolutely no easier after having children either. I used to get up at 6 AM to go to the gym four days a week, now the thought of missing any sleep I can get makes me sick.

Bottom line is, don’t forget about the most important person, you! We all have something in our life that relies on us or needs our help, but we must remember to put ourselves first at least part of the time. Investing in you is one of the few ways you can continue to grow yourself professionally and personally.

Below are a few suggestions on areas to continue investing in you, and how those can be beneficial, especially from a financial standpoint.

  • Set Financial Goals
  • Continue Your Education
  • Start a Side Hustle
  • Try Different Things
How to Set Financial Goals You Can Keep - The Chamber Jeffersontown

Set Financial Goals:

What’s the number one way to invest in you? Figuring out what’s important to you and then putting capital towards it. Maybe you have student loan debt you want to pay off, maybe there is a certain sports car that you want to buy for yourself, or heck, maybe you have a goal of building an indoor basketball court so you can improve your game.

Truthfully, it doesn’t matter what it is, it’s just important that you find something. Once you have that “it” or goal you want to drive for, start putting money towards it to achieve that goal.

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VOO vs. SPY – Which One Will Make You More MONEY?

One of the most common things that you will ever hear in the investing world is people using S&P 500 returns as a benchmark or basis for investing and even financial planning. Ok…that sounds great, but how exactly can you simply invest in the S&P 500? Well, it actually is as easy as finding an index fund that tracks the S&P 500, and that’s exactly why I’m going to break down two of the most popular in this VOO vs SPY comparison!

The S&P 500 is one of the most common stock market indexes that you will hear of, along with the Dow and the Nasdaq, as it tracks the performance of the 500 largest companies that are traded on a stock exchange in the U.S.

The S&P 500 is weighted based on the market cap of the company, so as you might expect, the larger companies make up an extremely large portion of the S&P 500, as you can see from this chart below from Market Watch:

A lot of people will use the S&P 500 as their benchmark for financial planning, especially in the Financial Independence Retire Early (FIRE) community, and I for one can put my hand up and say “guilty as charged”. Now, I’m not exactly planning to partake in the “RE” part of this, but the ability to become financially independent at a young age is something that is incredibly enticing to me and I know that it is to many others as well.

So, why do I use the S&P 500 as my benchmark and financial planning baseline? Well, there are a few reasons.

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The 3 Inputs for the Cost of Equity Formula

The value of any financial asset is the present value of its future cash flows discounted to the present. That is the basis of any discounted cash flow model and part of the process for valuing any company. Part of that analysis determines the cost of capital or discounting factor of those cash flows.

There are three steps to determining the cost of capital or WACC (weighted average cost of capital), which sets the discount rate for our DCF models, they are:

  • Cost of equity
  • Cost of debt
  • Weightings of each

The cost of equity and debt are parts of companies’ investments to buy assets and grow the business. They can self-finance with free cash flow or use debt or equity to acquire the assets.

Those acquisitions have a cost, and determining the cost of equity is part of determining whether the investment creates or destroys value for shareholders. For example, if the cost of equity is 10%, and the return on equity or investment is 12%, then the investment generates value, and likewise the other way.

Understanding the components of the cost of equity and their impacts on valuation will help give you a better understanding of the capital structure and financing decisions, along with a better valuation.

In today’s post, we will learn:

  • What is the Cost of Equity?
  • The Three Inputs to Calculate the Cost of Equity and How to Find them
  • How to Calculate the Cost of Equity with Examples
  • Investor Takeaway

Okay, let’s dive in and learn more about the cost of equity formula.

What is the Cost of Equity?

According to Corporate Finance Institute:

The cost of equity is the rate of return a company pays out to equity investors. A firm uses cost of equity to assess the relative attractiveness of investments, including both internal projects and external acquisition opportunities. Companies typically use a combination of equity and debt financing, with equity capital being more expensive.”

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Many companies and management use the cost of equity as a means of capital budgeting to establish a required rate of return for capital investments. It is also referred to as a “hurdle rate” for investments.

Companies raise money from equity investors (selling shares) and lenders (debt) to fund future investments. Both of these investors make their investments expecting to make some return.

Equity investors expect a return in line with investing in stocks, which carry higher returns along with higher risks. These equity investors expect a higher return which comes in the form of a premium to compensate for the higher risk.

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No-Nonsense Financial Planning Guide for the DIY Individual (Pt1: Expenses)

Success in financial planning comes down to a few key principles. Define your goals, curb your desires, and have patience and discipline. Make the right decisions and habits.  Have the right plan.

When it comes to managing your personal finances, it’s not a game to win overnight—it’s more like a path to follow, one you try and follow the rest of your life.

So how can you make a solid financial plan for yourself?

Well, I’m not a financial planner.

But—we’ve written a ton of articles on this blog to help people start and continue on their path to financial freedom, through some no-nonsense advice learned from the school of hard knocks.

Let’s talk about the three core pieces of good financial planning:

  1. Income
  2. Expenses
  3. “Profit”

Just like so many moral decisions can be decided with the simple statement—treat your neighbor as yourself (the golden rule)—so many personal finances decisions can be decided with one rule…

Spend less than you earn.

It seems that much of the world believes that “if I just made a little bit more money, I’d finally be able to get my finances together”.

Being around the personal finance world a long time, you start to realize that this mostly isn’t true.

It may shock you how many people make 6 figures a year and yet still live paycheck-to-paycheck. And you may be even more shocked how many people make less than 6 figures, yet are millionaires (shout out to The Millionaire Next Door!).

So let’s get down to that bottom line.

Simple examples you can apply to your own financial plan to get your “profit” up, by both spending less and earning more.

Starting with expenses…

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Struggling to Save? Start with These 4 Simple Auto-Investments

One of the hardest steps to becoming financially independent is finally getting that little snowball moving downhill by creating a gap between your income and spending. Once you’ve done that, it’s now onto the fun part – investing! And by far the best way to keep up the momentum with your goals is to set up some auto-investments.

Now, I don’t mean investing in your automobile because let’s be honest – that might actually be one of the worst investments you can make. Sure, you obviously have to spend some money on basic upkeep like tires, oil changes and brakes but you can save for that with something called a sinking fund. And guess what? That can be an auto-investment as well!

As with anything in life, the word automatic simply means that you’re taking some sort of process that used to be manual or require some sort of attention and now you’re just removing some steps from the process to have it completed without thinking.

Let’s keep going with the car analogy – a manual car requires you to press the clutch and shift as you want to change gears while an automatic car simply allows you to press the pedal to the metal!

Obviously an automatic car is better than a manual, right? Well, not always…

A manual is better if you’re racing because you have more control over getting your car to accelerate the way that you want to. And honestly, driving a manual is just more fun in general when you’re going on a joy ride.

My first car was a Hyundai Tiburon that I saved up for and bought out of pocket and I thought I was the coolest high schooler ever driving my 6-speed, manual, yellow Tiburon. Don’t believe me? It’s true….

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I did truly love driving that car around just for fun but things changed. Now I am old, have a wife and son, and when I’m driving, the last thing that I want to do is something that I don’t have to do. Sign me up for a boring ol’ white Nissan Sentra with an automatic transmission. The less that I have to do, the better. Now I get my fun by zoning out and the family falling asleep while I sit in silence!

“Andy, what the heck are you even talking about?”

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IFB216: How to Find Beaten Down or Out of Favor Companies to Analyze?

Welcome to the Investing for Beginners podcast. In today’s show, we discuss:

  • How to find good, profitable companies that we can invest in for the longer term?
  • How to use Malcolm Gladwell’s Ten Thousand Hours idea to learn more about a sector or industry, and how that knowledge compounds
  • Andrew shares a list of great books for beginning investors to start reading
  • How to find out-of-favor stocks or beaten down industries to look for investment ideas?

Today’s show is sponsored by:

Real Vision

Lendtable

Jordan Harbinger Show

For more insight like this into investing and stock selection for beginners, visit stockmarketpdf.com

SUBSCRIBE TO THE SHOW

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Transcript

I love this podcast because it crushes your dreams and getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern with a step-by-step premium investing guide for beginners. Your path to financial freedom starts now.

DAVE Alright, folks, welcome to Investing for Beginners Podcast. Today we have episode 216. And we are going to go back and answer a couple of great listener questions we got recently.

So without any further ado, I will go ahead and read the first question. So it’s a great one. So I have Hey, Andrew, my name’s Matt, I’m 17 years old. And I’ve been listening to your show for about a week. Now. I’ve listened to a lot of what you said. And one thing that seems very important is picking the investment type that suits you best. I’ve been messing around with the stock market for about a year now.

And I finally feel like I’ve been throat punched enough like we all do and have made the beginner mistakes and got them out of the way. I want to start investing about half of my paycheck, $500, into the stock market every two weeks. Because I have so much time for these stocks to develop, I’m not at all worried about small risks; what do you think the best strategy for me would be? I wouldn’t mind spending a couple of hours over these two weeks researching companies slash ETF. So I’d really like to know what you have to say. So what are your thoughts on Matt’s first part of his question?

ANDREW It’s interesting. So I guess, you know, I see you smiling over there about the throat punch, Sure.

DAVE Throat punch, yeah.

ANDREW If I were to start over and I was 17 years old, again, it’s hard to say what the best strategy for anybody would be because we’re all so different. In the end, it’s hard to say what kind of investor you’ll be five years from now. It’s, it’s, it’s so uncertain. So I would say right now, what’s most interesting, and kind of take that path and, and really go down that rabbit hole and follow your curiosity and trying to learn and soak up as much as you can, and then invest alongside that, I think that’s a great place to start—and understanding the principles of value investing. And all that has to offer as a compounder. Wealth is also a really great place to start, and that can kind of work together as you’re dipping into the market.

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