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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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S&P500 Investing: You Must Know the Difference Between SPX and SPY!

A piece of advice that many people, including myself, give to new investors is to just “invest in the stock market,” but that does that mean? Well, for a new investor, I’m just telling you to get your money invested in the total stock market to get those types of returns. That’s easier said than done, but that’s why I am here to explain difference between SPX and SPY.

It’s easy for people that have been investing for awhile to say something like, “just put your money into the stock market”. Well…duh.

Unfortunately, for someone starting out brand new, this is not clear at all and can be very confusing. When we say this, what we’re telling you to do is put your money in an Exchange Traded Fund, or ETF, that mimics the stock market. Let me get even more simplistic.

When measuring the returns of the stock market, there are a few different groupings of companies that people use.

  • Dow – 30 Large Companies
  • S&P 500 – 500 Largest Companies by Market Cap
  • Russell 2000 – Smallest 2000 stocks in the Russell 3000
  • Nasdaq 100 – 100 Largest non-financial companies listed on the Nasdaq

Each of these have their own different groupings of stocks that make them up but people will look at those groupings and say, “wow, the market is up 1% today”. What they’re referring to are one of these groupings of stocks, most likely either the Dow or the S&P 500.

Personally, I think that the S&P 500 is the most representative of the total stock market because you get such a vast majority of companies that I would be the most likely to invest in. For that reason, I like to benchmark my returns against the S&P 500 as a barometer for how my investments are performing.

I view the S&P 500 as my “risk free” option where it’s the easy alternative that I could take as a completely hands-off approach to my investing journey if that’s what I wanted. But does that mean that I am literally buying shares of the S&P 500?


The S&P 500 has the ticker of SPX when you look it up on a website. For instance, see the screenshot from Market Watch with the SPX price: 

But you can’t actually buy shares of the S&P 500, or SPX. In fact, when I go to Fidelity and type SPX into the search bar, you can see that the S&P 500 doesn’t even show up!

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What’s the Best Way to Protect Your Investments? Stop Loss vs. Stop Limit

Sometimes investing in the stock market can feel a little bit, “frothy”, per se, and when that occurs it’s nice to have something to fall back on. Every time I turn on CNBC or listen to a podcast, people are always talking about how overvalued the market is and it’s quite honestly terrifying.

If you’re looking for protection in these times, you should really consider all of the pros and cons for a stop loss vs. stop limit.

Let me paint a picture of where we stand in January of 2021…

We’re in one of the strangest times that I can personally ever remember, just in general – not even investing related. The U.S. seems to be a very divided country and you can see it in people’s actions all the way from the news to just scrolling your own personal Facebook, Twitter or Instagram.

And that’s why I basically only use social media for investing related topics rather than anything else, and it can be a great resource when you use it that way!

We’re in this weird world where the earnings of many companies have been absolutely abysmal because of COVID-19, but the prices of these companies are just soaring through the roof!

It’s insane and truthfully, it’s extremely scary. You know how the typical “value” stocks will carry a low P/E in the 15-20 range? Well, I always think of banks as being value stocks – the P/E of Wells Fargo is 87!

I pulled up a Value ETF that listed Disney in it…Disney doesn’t even have a P/E because they have negative earnings! Things are just bonkers right now and the word that I hear everyone use to explain it is “frothy”.

You can find a thousand people talking about how we’re in a bubble because earnings are so low and valuations are so high and it’s extremely scary. I tell myself that this time is different because we’re in a pandemic and we’ve been propped up with a ton of stimulus.

The stimulus is showing no end in sight but that’s going to potentially keep the market going higher, and with anticipations that an effective vaccine is going to be quickly distributed, there’s hope that earnings will return back to normal as the world opens back up.

But are things actually different? I feel like “this time is different” is what people always say right when they’re actually more of the same, so maybe that means that we are actually in for a very rough pullback in the market.

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IFB184: Boring Dividend Advice From A Boomer

Welcome to the Investing for Beginners Podcast. In today’s show we discuss a few diferent topics:

  • How DRIP investing works
  • The power of dividends over a long period
  • Shareholder yield, the growth of share buybacks plus dividends

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


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Announcer (00:02):

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. A step-by-step premium investing guide for beginners, your path to financial freedom starts now.

Dave (00:32):

All right, folks, we’ll welcome you to the Investing for Beginners podcast. Tonight is episode 184, and we’re going to return to a subject we have not talked about in a little bit. We’re going to get you all jazzed and excited about dividends. Yeah, that’s it dividends. So I’m going to turn it over to the Drip King himself. My friend, Andrew, we’re going to start talking about some dividends, Andrew, take it away.

Andrew (00:52):

The only thing I can promise is there’ll be one person excited about dividends, and outside of that, there’ll be no more promises because when it comes to the stock market, dividends are not the most exciting thing. And I get it right, especially in the market environment. Like now you have an IPO like door dash to go up 50% in. How, how, how, how fast are they going? 50% Dave, you should take five days, five whole days.

Andrew (01:20):

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Valuation of Stocks in a Cyclical Industry

Determining how to value companies in a cyclical industry is a special case, because these earnings are generally more tied with the booms and busts of the economy.

The economy moves in cycles.

There are periods of economic expansion, where businesses are started and credit flows freely, driving up prices and prosperity. There are also periods of economic contraction, characterized by recessions, bad loans, job losses and flat or downward price movements.

Similarly, the stock market cycles through natural boom and bust periods, which generally follow the economy over the long term.

Some companies, and industries, are more affected by these economic and stock market cycles than others.

Those are the companies which we define as cyclical.

Which Industries Are Cyclical?

What’s interesting about business is that it evolves over time. Industries that were once considered cyclical may no longer be cyclical anymore, and vice versa.

For example, until the 2007 housing bust, real estate was considered counter-cyclical to the stock market. It was believed (and demonstrated for a long time), that real estate prices always went up.

Until they didn’t of course, but you can see how the definition of a cyclical industry can be opaque.

Just because something has been cyclical in the past, doesn’t mean it will necessarily be cyclical in the future. And various commodity industries may move through their cyclical patterns at different times, and some may never experience a down cycle due to limited supply and/or continuous demand.

Noting that there’s no perfect definition of a cyclical industry (or company), here’s a good reference from Morningstar to categorize the cyclicality of the 11 sectors of the stock market:

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Save Money on Currency Conversions Using Norbert’s Gambit!

Currency conversion fees can easily eat into your investment returns with brokerages taking a spread around 1.5% – 2.5%. However, investors can utilize Norbert’s Gambit as a sneaky workaround to keep brokerages hands out of your pockets. The technique is completely legitimate and takes advantage of investors’ ability to sell their shares in the market of their choosing.

This article will teach investors the logic and steps on how to use Norbert’s Gambit for their own investment purposes to keep their currency conversion fees next to nothing! 

Foreign Exchange Fees are Critically Important

For investors with accounts in more than one currency, foreign exchange fees can quickly add up. With annual historic equity markets returning around 10%, currency conversion costs of 1.5% – 2.5% are very significant.

Wise investors know to convert currencies once and leave the money in the account forever (or at least until retirement!), but the most knowledgeable investors have heard of a technique called Norbert’s Gambit, which makes currency conversion costs practically nothing.

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Taking Peer Group Analysis One Step Further for Analyzing Competitors

There’s many superficial ways to make a peer group analysis as part of evaluating an industry, or a company’s competitive advantage against its competitors. I think putting yourself into the shoes of management(s) is a much more in-depth and insightful approach.

Part of analyzing a company’s competitors and industry is by creating an industry map. This involves a list of all of the other companies (or companies’ segments) which earn revenue in the same market as your company.

This information isn’t always easily or freely available, due to the less stringent rules of segment accounting and the presence of private (non-publicly traded) competitors. I think most websites which display peers or competitors in an industry don’t do a through job, so I highly recommend reading multiple annual reports (10-k’s) to create a more accurate industry map.

Once the base industry map is created, the peer group analysis is started, not finished.

This post will cover the following aspects of this type of an analysis:

  • Introducing the Competitor/ Peer Analysis Framework
  • The Competitor’s Motivations
  • The Actions of Competitors
  • More Peer Group Analysis Considerations
  • Investor Takeaway

I think an analyst or investor can find great benefit from creating what Michael Porter called “A Framework for Competitor Analysis”.

Doing this goes past some of the more common methods of peer group analysis such as relative valuation ratios, comparisons of margins, or growth, etc.

This kind of a deep peer analysis might not be applicable to all, or even many, of the businesses you analyze over a career or investing lifetime. But in the cases where it does, this deeper understanding can create a serious circle of competence and conviction about a company and its place in its industry.

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How to Evaluate Lifetime Value (LTV) with SaaS Companies

One of the most important metrics for a Software as a Service (SaaS) company is their lifetime value (LTV). This is such an important metric because the concept of Software as a Service is great in theory, but you’re banking on those customers to continually come back and keep renewing their service. So, how do we calculate LTV for SaaS companies? Let me show you!

First, I want to talk a little more about LTV and SaaS. As I mentioned, LTV is the lifetime value of a customer over the entire time that they’re purchasing from a company.

I frequently will hear this concept discussed on Shark Tank when you hear questions asking the reorder rate is or how many months a customer might be subscribed to a certain service.

The Sharks are trying to find out how much revenue will be generated from that single user over the course of their relationship with that specific company or product, or, the lifetime value of that customer.

LTV for SaaS Companies

As I mentioned, SaaS stands for “Software as a Service”, meaning that it’s basically an on-demand type of service where you will pay on a subscription model.

Instead of people downloading a program to their computer, they will access the application via a web browser which can save a lot of time and headaches for them with maintenance costs. Additionally, the upfront costs that a customer of a SaaS application are likely much lower.

You typically will see cloud companies be those that utilize a SaaS methodology to sell to their customers. 

The reason that LTV is so important for companies that are offering SaaS, or really any subscription model, is because customers will frequently download or use a program for a free trial period and then cancel.

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Defensive Investors: Rules from the Classic Book, The Intelligent Investor

Benjamin Graham, in the 14th chapter of the Intelligent Investor, outlines his seven criteria for defensive investors. The Intelligent Investor, considered by many to be the must-read book on investing, discusses value investing ideas.

Graham outlines his ideas regarding finding undervalued or out of favor stocks and buying them with a margin of safety in the book. These ideas are central to value investing and have been embraced by many, including Warren Buffett, Mohnish Pabrai, and Howard Marks.

Two of Buffett’s favorite chapters are Chapter 8 and Chapter 20, in which discussions of the margin of safety and Mr. Market occur. Both of the tenets are central to Buffett’s success and other investors, including yours truly.

Graham focuses much of his time on protecting your capital and not losing any money, thus the conversation concerning defensive investors.

In today’s post, we will learn:

  • What is a Defensive Investor?
  • Outline of Chapter 14: The Intelligent Investor
  • Breakdown of the Seven Rules
  • Investor Takeaway

Okay, let’s dive in and learn more about Chapter 14 and Ben Graham’s rules for a defensive investor.

What is a Defensive Investor?

In his book, Graham describes investors as belonging to two camps:

  • Defensive
  • Enterprising

According to Graham, the defensive investor is an investor who is unable or unwilling to put in the time required to be an enterprising investor. Think of the difference between the two as the defensive investor is passive, where the enterprising is more active.

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The Ultimate Guide to an Effective Family Finance Meeting

Do me a favor and before you read anything further, go use the bathroom. Get yourself a drink. Eat a snack. Get ready, because this post about hosting an effective family finance meeting is legitimately one of the most lifechanging things that I think you can do for both yourself and your family.

If you’re reading this, I am guessing that you already have a solid grasp on your family finances, but does everyone in your family share that same passion?

Let me tell you about my own personal situation – in our family, I am the one that handles a large majority of the financial decisions. I manage our budget and make the investing decisions, but I am definitely not the only one that makes the large, important decisions about things like:

Admittedly, I have more knowledge on these topics than my wife does because I am a huge nerd that loves to continuously read and learn about the ways to make our money work for us in the most efficient way possible, but that doesn’t mean I make all of the decisions.

When we get a bonus, tax return or a stimulus check – it’s a discussion that begins with my recommendation for usage of the money, but doesn’t always end with it being used that way.

While I am personally one that’s more of a risk taker and would invest nearly all of our money, my wife is one that prefers the stability of a strong emergency fund and less monthly debt payments. Neither is right and neither is wrong, so we try to blend our two philosophies together to create a cohesive Family Finance Plan.

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Levered Free Cash Flow Formula Explained: Should I Use It For My DCF?

Free cash flow and a DCF go hand-in-hand in estimating valuation. But should levered free cash flow (also called FCFE) be used in a DCF? How does leverage affect a DCF, and future cash flows, and the value of a company?

These are the questions I will be answering in this post.

The way that we will come to these answers will be through the following sections:

  • Definitions of FCFE, FCFF, LFCF, UFCF
  • Defining the Levered Free Cash Flow Formula
  • Levered Free Cash Flow vs Unlevered FCF; DCF Implications for Both
  • How to Find Levered FCF Flow in a 10-k [Real-life example]

To define what levered free cash flow is, it is simply the amount of cash available for either (A) redistribution to shareholders, or (B) to reinvest back into the business.

The key to the equation is that this cash is the cash left over after paying all debt obligations have been paid (for the fiscal year).

Defining LFCF and FCFE; UFCF and FCFF

Also, note that levered free cash flow is also sometimes called FCFE (free cash flow to equity). Note the following definitions so you don’t get these FCF terms mixed up for your DCFs.

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