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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 21,000+ 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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Insider Ownership Legalese Made Simple: How to Investigate It Yourself

Depending on the public company, the insider ownership situation can be simple or very complex. Publicly traded corporations can divvy up ownership through 1 class, or multiple classes of shares, and can designate these classes as voting or non-voting.

Companies with active founders can sometimes structure their share classes in this way in order to retain control of a company while still accessing vast amounts of capital through the public markets.

While insider ownership (and transactions) in the traditional sense may refer to management and their relative ownerships of a company, the ownership situation of major holders of the stock can sometimes be much more impactful than management’s ownership themselves.

For example, if a founder retains majority control of his company after going public, he can effectively control major decisions of the company that are usually voted on by shareholders by proxy. This can include things like:

  • Who management will be.
  • Whether a company will make an acquisition or not.
  • Whether a company will allow themselves to be acquired or not.
  • What management compensation will be.
  • The initiation of special dividends or buybacks.
  • Others…

But, majority voting control of a company doesn’t always mean complete control of every aspect of a business—especially if the owner decides to hire someone else for other major company decisions such as a CEO, CFO, or COO.

With all of this in mind, this post will discuss insider ownership in the sense of company control. I’ll show how to easily research the ownership structure of any public corporation you are interested in.

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How to Analyze Investment Banking Stocks: Understanding the Financials

The oldest investment bank in the world, Berenbeg Bank, began in 1590 in Hamburg, Germany. And from there, the investment banking journey began. Recent incarnations of the investment banking world include Goldman Sachs, JP Morgan, Bank of America, and Deutsche Bank.

Investment banking stocks are some of the more misunderstood banks in the banking universe, not everyone is familiar with their operations or what they even do, but the investment bank is a central figure in IPOs, for example.

Remember the movie “The Big Short”? One of the central banks in the movie was Deutsche Bank, which featured several of the investment bankers who were working to short mortgage bonds before the meltdown of the financial sector.

Investment banks have become synonymous with shady deals and back-office shenanigans, but they are a central force to growth in the economy, and like most things in the world, not all investment banks and bankers are bad.

With the recent IPO of Snowflake (SNOW) and the frothiness of the public offering, I thought it would be a great time to examine investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS), which were the banks that enabled Snowflake to go public.

In today’s post, we will discover:

  • What is an Investment Bank?
  • How Does an Investment Bank Work?
  • Understanding the Financials of an Investment Bank
  • How to Analyze an Investment Bank

Ok, let’s dive in and learn more about investment banks and investing in their stock.

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3 Simple Steps to Use Stock Market Analysis Tools to Find Great Companies

The most common question that I get from new investors is “how do I find stocks to invest in?”  Unfortunately, that’s not a simple question to answer, but with the help of these 3 simple steps, you can utilize some amazing stock market analysis tools to find great, undervalued companies.

I really think that Investing can be broken down into three separate focuses, per se – Passive Research, Valuation/Metric Review and the Deeper Dive.  Each one of them are extremely important and all play a vital role in finding companies that are going to perform well for you. 

So, why waste any time?  Let me show you how to execute!

1 – Passive Research

Passive Research, to me, is anything that you might do for fun to simply learn about new companies.  This can honestly be anything at all that might spark your mind to think about companies to potentially invest in.

For me, my #1 form of passive research is with podcasts.  I love listening to all types of podcasts from Motley Fool to CNBC, but of course my #1 is the Investing for Beginners Podcast!

Podcasts are a great way to let my mind relax and just listen while I’m working out, driving, doing chores, cooking dinner – anything!  I can just sit there and hear about people’s thoughts on a company, industry, etc. without any real effort.

I’m just trying to soak up what I hear and be unbiased and understand their opinions.  This has really helped me start to diversify my thoughts and look into companies that didn’t directly fall into my circle of competence, and that’s how you can become a more diversified, better, investor!

Another way that I like to do passive research is with stock screeners.  I know that stock screeners can be misleading at times, but I really like to look at different valuation ratios and just see what I end up with.

It’s never a final decision for me to invest, and honestly a stock screener might be the type of passive research that will then require the most research for me because I don’t know anything about the company except for a few metrics.

Stock screeners are always fun tools to look at, but with so many companies blowing through the normal valuation rules, they might be more prohibitive than normal – and maybe that’s a good thing! 

I mean, Snowflake ($SNOW) just had their IPO this week and that was a cloud company that I was really looking at hard, but by the time the public could buy into the company, their shares were at a price so high that it was generating a P/S of 175! 

Heck.  No.

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IFB170: Suspended Dividends, Industry Focus, eLetter Holdings

Announcer (00:02):

I love this podcast because it crushes your dreams of 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 say there, and Dave step-by-step premium investing guidance for beginners. Your path to financial freedom starts now. All right, folks.

Dave (00:33):

All right, folks Well, welcome to the Investing for Beginners podcast tonight. We have episode 170, Andrew, and I am going to answer some great listener questions we get recently. So I will go ahead and start to read our first question. So I have Andrew; I know you have spoken about having hard rules about selling a company. And one of them is when they cut their dividend during COVID-19, some companies cut their dividend temporarily, but I’ve had a long history of dividend growth. Do you make an exception in this particular circumstance or stick to the rules?

A specific example is Disney’s great company, but they suspended their biannual dividend payout to combat the significant decrease in revenue. While this isn’t a sign, the company’s in trouble. Would you still hold on to such companies in this rare circumstance, respectfully? Matthew, what are your thoughts on that, Andrew?

Andrew (01:25):

Yeah, so I’ve had to deal with this quite personally, in the sense that, you know, you have varying degrees of how companies are dealing with their dividends during this crisis. We’re recording this now in the middle of September. And so you’ve seen a lot of initial fear that happened at the beginning. And then I’ll, it seems to me that there’s more confidence that’s been building since the crisis. You know, you have managements who are starting to provide guidance, feeling more comfortable with reinitiating dividends and things of that nature. So I tried, on the one hand, you want to take a case by case. On the other hand, you also want to understand that if you’re going to make rules hard rules like I did, where, you know, as an example, my, my hard rule is you sell on a D on a dividend cut, complete dividend cut. I also have another hard rule I sell on negative earnings. So those have been the two hard rules so far that I’ve stuck to in my investing life.

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5 Disadvantages of Credit Cards to Be Aware Of Prior to Opening One!

“Wait – Andy, are you telling me that there actually are disadvantages of credit cards?”

Yes, I certainly am.

I know that sounds facetious, and it mainly is, but everyone always talks about the advantages of credit cards, and that includes myself.

I mean, there’s the obvious ways that you can make money with credit cards such as rewards, but there are also some more hidden ways that you can make money too! And of course, you can actually improve your credit too if you’re using them properly!

The thing about all of these ways to make money are assuming is that you make on-time payments every single time.  If you’re late just once, you’re going to get a ding on your credit and likely pay a late fee that will be worse than any rewards that you have saved up. 

So, what exactly are some of these disadvantages of credit cards? Well, let’s start with the easy one!

The Insanely High Interest Rate

In 2019, the average interest rate was 17% according to Nerd Wallet.  Honestly, I thought that the interest rate was going to be a lot higher than that, too!  I know that I personally have cards with a higher interest rate than that, but I pay them off every month so I don’t care about the rate.

But what exactly does a 17% APR actually mean to you?

Well, you know how compound interest works with investing?  If you invest $1000 and you make 10% in year 1, then you have $1100.  Then in year 2, if you make another 10%, you now have $1210, because you’re making 10% on your initial $1000 plus 10% on the $100 in interest you made in year 1! 

So, your interest keeps compounding, which is a great thing when you’re being paid that interest.  When you’re the one paying it, it’s not good.

Just go to a credit card payoff calculator online like Bankrate and then you can try out some various scenarios.

I decided to do 4 different scenarios: $10K balance with a 17% APR making either $200 or $300 monthly payments, and then a $10K balance with a 22% APR making either $200 or $300 monthly payments.  The results were as follows:

17% APR

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Election 2020: Effect of the Proposed Biden Corporate Tax to the Stock Market

As the election approaches, investors naturally grow nervous with the uncertainty. With Joe Biden’s promises to increase corporate taxes and capital gains taxes, investors wonder about the effect to the stock market as a whole, and whether they should sell ahead of the election.

Because this is a financial website, I will not bring my politics into this article. Instead, I will try to present all known facts and estimates without bias and using some common sense.

For the following breakdown, I will be referencing statistics from two specific sources:

  1. Joebiden.com – Biden’s campaign website
  2. Tax Foundation – a website that generally leans libertarian

First, let’s summarize the current tax environment. Since President Trump took office in 2016, the Tax Cuts and Jobs Act (TCJA) changed corporate, capital gains, and individual taxes.

Broadly speaking, taxes in all areas were cut across the board, with additional tax credits and deductions applied as well.

Today, the rates most likely to impact investors sit at:

  • Corporate Tax Rate = 21%
  • Capital gains (long term) = 23.8%

The potential bigger impact to companies in the stock market, which will be reflected in fundamentals and prices, is the corporate tax rate, which will be the focus in this article.

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Seeking Alpha Authors You Can Trust in a Post COVID World

One of my favorite places to get investing information has always been Seeking Alpha, but I feel like more and more nowadays, people just are so focused on getting clicks that the actual quality of the information that is shared drops rapidly by the day!  I’m not saying Seeking Alpha is sacrificing quality, and quite honestly, I’m really saying the exact opposite, because there are two Seeking Alpha authors that I really, really trust!

I can’t speak for you, but COVID has been making me feel “some type of way” as the kids say.  It’s got me stressed, anxious, and generally looking for excitement in new ways since sports essentially hadn’t existed until recently and I can’t go do anything – and all these feelings have been making me a less disciplined investor.

In weird times like this, I try to focus even more on the basics and go back to the sources of information that I trust the most, and the two authors from Seeking Alpha that I trust the most are two that you are also super familiar with – Andrew Sather and Dave Ahern!

You likely know Andrew and Dave from the Investing for Beginners podcast, the Investing for Beginners blog, or maybe you’ve used some of their products like the VTI, the Sather Research Letter, or even the BRAND NEW Fat Pitch Fundamentals, but there’s a reason you keep coming back – they’re knowledgeable, aren’t going to feed you BS, and will give you the truth.

It’s that simple!

You see it on the podcast frequently – they will challenge each other and sometimes just disagree, and that’s good!  I love the differing opinions and their areas of expertise and you see it translate into their articles on Seeking Alpha.

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15 Personal Budget Categories That You’re Likely Forgetting

The easiest way to fail on your personal budget is to not plan.  That’s it – that’s how to fail.  Or, maybe you plan but your plan fails you.  To have an effective plan it all starts at the same point – making sure you have the correct personal budget categories included from the get-go.

Hear me out – if you have budgeted 100% of your money and then something crazy comes up, like say a flat tire – what do you do?  Well, you have three choices:

  1. Reduce a different category by the same amount as your flat tire repair
  2. Pull from your emergency fund for something that I honestly don’t consider to be an emergency
  3. Simply go in the hole.  You didn’t budget for it and now you’re going back into debt and throwing this on a credit card

#1 is obviously the best option but it’s still crappy.  What if it’s the last day of the month?  You don’t have anytime to spend less in the other categories so you’re likely going to have to select option #2 or #2.

This can all be completely alleviated if you were to just have the proper personal budget categories from the get-go!  That’s all it takes!  Then you can properly allocate your income to each section that is relevant to you.

But you can only properly allocate them if you have a budget planner that is going to allow you that flexibility, and that’s why I think that the Doctor Budget is the best budget planner on the market

Not only does it allow you to be flexible (because life isn’t static, right?), but it forces you to actually track each purchase so you truly know where your money is going.

That might sound taxing, but I can track and entire month of spending in just 15 minutes – it’s really not that bad!  I think that spending 15 minutes on your budget each month is the perfect amount of time.  Anything more and you’re not going to do it; anything less and you’re not actually going to learn where that money is going!

Take a look – you might be impressed!

A lot of personal budget categories are obvious like mortgage/rent, groceries, gas for your car, student loans, etc., but many of them are not obvious!  So, what are these magic personal budget categories that everyone forgets? 

Well, let’s get started on them!

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Starting an Investment Firm: LLC, Limited Partnership, or Incorporate?

As an investor for over 7 years and LLC co-owner for over 3, I’ve thought alot about how to use my passion and knowledge for investing in the most optimal way. Maybe you’re thinking of starting an investment firm and are wanting to either invest on your own or on behalf of others. 

Well, there’s so many ways to do it, and it’s so complex…

Let me give you some important pieces from all of my research on the whole thing. I’m not a tax expert or corporate lawyer professional, so don’t take any of this as a personalized recommendation. However, I think I can at least narrow it down for you, so you understand the big picture hurdles around investment firms and vehicles.

For starters, let’s observe what one of the greatest investors of all time has done– Warren Buffett.

What’s interesting about Buffett’s case is that he went 2 different directions with investment management, first owning his own Limited Partnership and then closing it down in favor of owning stocks in his corporate conglomerate, Berkshire Hathaway.

Before we discuss why Buffett made the switch from Limited Partnership to Corporation, let’s get some confusing legalese out of the way.

  1. A corporation is different from an LLC

LLC stands for Limited Liability Company, and not Limited Liability Corporation, which was something I got confused on for a while. Maybe you’re smarter than me and didn’t have this issue.

  1. You can invest (buy stocks) in all sorts of ways: for yourself in a brokerage account (or even as a daytrader with margin), as an investment firm where you manage assets for clients, as an LLC for yourself, as an LLC for yourself and others, as a limited partnership for yourself and others, and finally, as a corporation for yourself or others.
  1. Here’s what gets even more confusing. Your legal status and tax status for an investment vehicle can be two different things.
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MLP Valuation – Taxes and Metrics for this High Yielding Investment

Master Limited Partnerships, also known as MLPs, are a great vehicle for income investors, similar to REITs, in that they distribute the majority of their earnings in the form of dividends. However, not many investors are familiar with these types of investments, let alone how to conduct an MLP valuation.

Dividends and the search for yield is the goal of many investors, and MLPs offer both in spades, but they do come with risk, as with any other investment.

The trick is to understand the companies and how they make money.

In many cases, an MLP might offer a yield of upwards of 9%+, which is extremely attractive, but it does come with risks associated with those high-yields.

Like REITs, MLPs have their own language they speak, and the key to understanding an MLP is to understand that language. The good news is that the language isn’t that much different from many of the companies in the market. And once we learn that language, valuing an MLP is no different than Walmart.

In today’s post, we will learn:

  • What Is a Master Limited Partnership (MLP)?
  • Taxes and the MLP
  • Important Metrics for an MLP
  • How to Value a Master Limited Partnership

Ok, let’s dive in and learn more about MLPs and how to value an MLP.

What Is a Master Limited Partnership (MLP)?

An MLP, according to Investopedia:

Master limited partnerships (MLPs) are a business venture that exists in the form of a publicly traded limited partnership. They combine the tax benefits of a private partnership—profits are taxed only when investors receive distributions—with the liquidity of a publicly-traded company (PTP).

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