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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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Important HSA Rollover Rules: How to Utilize them Efficiently

Have you found yourself in a situation where you might need to rollover your HSA?  If so, no worries!  There are a few HSA rollover rules that you need to keep in mind but they’re all very easy to follow as long as you take the time to understand them.

If you’re like me and the acronym of HSA, which stands for Health Savings Account, really gets you excited then guess what, you’re a total nerd!  I’m not saying that to make fun, I’m saying it as a term of endearment as I am that exact same way.  I personally think that an HSA is one of the underrated tools that you can use to get ahead in life. 

An HSA offers a triple-tax advantage that I thoroughly explain in a previous post but I will spare you from going through that again because that’s not why you’re reading this – you’re reading because you want to know how to efficiently rollover your HSA!

For starters, there are a few different times that you can, or should, rollover your HSA – let’s discuss!

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A Complete ‘Common Stocks and Uncommon Profits’ Book Summary

If you have been following my recent posts then you know that I’ve recently been putting together some chapter summaries with key highlights for the book Common Stocks and Uncommon Profits by Phil Fisher. 

You also will know that we’re now at the end of the book, so it only makes sense for me to go through and highlight some of the key takeaways that I have had from reading, and summarizing, the book!

book summary

You need to create your own checklist and stick to it.

Fisher has 15 key points that he evaluates when deciding to purchase stock of a company that range from all different types of evaluating metrics such as quantitative metrics like wide profits or sales growth to qualitative metrics such as the management having a high-level of integrity or having depth to their management. 

Only you can determine what is important enough to be included in that checklist, but you need to decide that for yourself.  Some people will lean much more on the financials while some will lean on the qualitative, cultural aspects of the company. 

Some will prefer revenue growth while some will focus more on earnings growth.  There’s a never-ending amount of metrics that you can use to evaluate a company, but the important thing is for you to find out what is the most important in your own evaluations.

There are ways to evaluate qualitative metrics without being a professional investor

For instance, I always would see people say that you should evaluate the culture of the company but how the heck am I supposed to do that?!?!

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IFB127: High ETF Fees, Diversifying in the 11 Sectors, Lazy or Uninterested?

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 number, your path to financial freedom starts now.

Andrew:                              00:35                     All right folks, we’ll welcome to the Investing for Beginners podcast. This is episode 127 tonight, Andrew and I are going to take some listener question and answer them for you. If you are enjoying this show please subscribe for future shows. We’ve got some great questions recently, and so we thought we would read through those and do our a little back and forth and give and take. So Andrew, why don’t you go ahead and read us the first question.

Andrew:                              00:57                     Sounds good. So this one’s from Stefan L. He says, I’ve been following your podcast and your newsletter for about two or three months now considering signing up for your Eli there, but first and they work out the best way to invest in the US market from abroad. He says, I live and work in Bulgaria. He says I’m interested in investing in the S and P 500 during the dollar-cost averaging with monthly installments of about $300; however, the options to buy an ETF from a local broker are terrible. They want to charge me 4% commission plus $2.20 per month plus bank transaction and currency exchange fees, which roughly amounts to six and a half to 7% given that the average growth ofS and P 500 is around 8% of the year, I can hardly make any money in the long run.

Andrew:                              01:44                     Have another option to buy stocks slush funds through interactive brokers where I’ll costs amounts of two and a half to 3% however, based on the audiobooks that I’ve been listening to money mastering the game by Anthony Robbins, I would say that this is still quite an expensive option. The only benefit is that by law, ETFs and mutual funds are not taxed if bought from or through an EU brokerage firm. So I save 10% of income tax. He says I was wondering if you could let me know what are the standard fees you pay in us per transaction slash monthly installment, and can you elaborate on the platforms you use for purchasing stocks and the taxes you pay? So timely, right. Dave, what are your thoughts?

Dave:                                    02:28                     Yeah, very timely for sure. So I guess my thoughts are, so I guess what’s the answer to the last question first? Cause that’s going to be the easiest part of this. The standard fees that we pay right now in the US or are zero dollars. So for any transactions buying an ETF, a mutual fund, or individual stocks, you are not going to pay a single penny for making a transaction in the US right now. So that’s going to help costs

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Comparing Compound Interest from Paying Student Loans vs Investing

If you listened to the most recent episode of the Investing for Beginners Podcast with Andrew and Dave, then you heard them both GO IN on their opinions of whether you should take any extra money at the end of the month and pay off student loans or if you should invest that money

We often talk about compound interest for investing, but student loan compound interest is a very real thing, too! Honestly, this is one of my favorite topics to talk about with people when it comes to their own personal finances and I feel like it comes up a lot in conversation. 

In fact, it literally came up with a coworker of mine last week.

First off, take a second and pat yourself on the back.  Most people that I know would take any “extra” money at the end of the month and go blow it on something stupid that they don’t need. 

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The Best Investing Instagram Accounts to Follow for Tips and Advice

I recently wrote a post about learning how to invest from different YouTube channels because if you’re anything like me, then you’re likely a visual learner.  Learning is great, but when you’re first getting started doing anything that’s new, you need to stay motivated if you want to stick with it, and I think these 4 Investing Instagram Accounts are the perfect tools to keep you focused on your investing journey!

1 – Save to Invest

This is easily the #1 for me.  The way that I get focused and motivated is with the cold hard facts!  Quotes are great tools to help me learn about something, or sometimes they will have some humor that really hits the point home, but nothing gets me more motivated than seeing tangible changes. 

For instance, take a look at this infographic from the savetoinvest page:

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5 Historical Stock Market Facts That Can Help Boost Your Returns

Investing is tough, right?  Wrong!  Investing is like anything else – it’s only tough if you don’t know what you’re doing.  We’re here to help you along the way and I’ve outlined 5 key stock market facts that will help you in your investing journey!

1 – If you invested in the S&P 500 the year after the 10 worst years since 1950, your average return would be 7.58%.

Do you know what this tells me?  It tells me that you shouldn’t sell after a bad year of investing and if anything, you should buy more.  This really is showing the importance of buying low and selling high.  If you would’ve sold at the end of these years your average return would be -18.41%! 

I always talk about the importance of staying in the market and not selling when bad things occur, but the chart below really shows why.  Yes, some years continue to be negative as well, but eventually the tide will turn, and you’ll start to reap the rewards of the stock market. 

2 – Average Returns for the S&P 500 since 1950 are 9.02% and this doesn’t include dividends!

If you include dividends, the average return is 12.61% and the Compound Annual Growth Rate, or CAGR, is 11.17%!  What does this tell me?  Well, it tells me two things:

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How 13f Filings Can Help Investors Evaluate Insurance Stocks

How do insurance companies make money? We all think that the premiums that we pay every month are how most insurance companies make money. Insurance companies make money on their investment portfolios, and the big question is, how do we measure that performance to determine a company worth our investment?

Everyone is aware of Warren Buffett and his legendary performance as an investor, and he has used Berkshire Hathaway and their insurance float as a means for his investing funds.

Unlike most insurance companies, Buffett has been investing those funds in stocks, and his prowess has earned his shareholders an immense amount of money.

My goal with this post is to help illuminate how insurance companies make money, as well as how we can measure this performance and what investments they are making.

Insurance companies won’t double in a day, but they can make value investors like us wealthy over the long haul. High-quality insurance companies can generate incredible long-term returns from a business that dates back to antiquity.

As we have seen with my articles on the insurance industry, the insurance companies have a language of their own; this article is another attempt to help demystify that language.

What Investments do Insurance Companies Make?

Insurance companies invest in many areas, but mainly they invest in bonds. Yes, you read that right; they invest in bonds. Investing in bonds makes sense because bonds are likely the safest of all investment categories.

Insurance companies, being in risk management, would logically find the lowest risk that bonds offer as very appealing. But this is not the only reason.

Insurance companies like MetLife could easily take their premiums and stick them in a savings account and call it a day. But that wouldn’t be very good idea, and there are other ways to invest that money to make more money.

Investing the premiums does do two good things: it increases the insurance company’s profits and makes it possible for the company to lower its premium amounts, making its policies more attractive to customers.

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IFB126: Learning from 3 Master Investors with Scott A. Chapman, CFA

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 number, your path to financial freedom starts now.

Scott:                                    00:36                     All right folks, we’ll welcome to Investing for Beginners podcast. This is episode 126 tonight; we’re going to have some fun. We are going to interview an author, gentleman named Scott Chapman. He wrote this amazing, fantastic book called Empower your Investing, and we’re going to chat about this tonight. So without any further ado, I’m going to turn it over to Scott. Scott, why don’t you tell us a little bit about yourself?

Scott:                                    01:00                     Well, thanks to Dave and Andrew, that’s a pleasure to join you tonight. A little bit of background about myself. I’m a professional portfolio manager. I founded my firm about six years ago called Chapman investment management. And this, this book that you mentioned in power, you’re investing. The subtitle is adopting best practices from Peter Lynch, John Templeton, and Warren buffet. This whole project started about 25 years ago and I had gone through and gotten my MBA in finance and had gone through the CFA or chartered financial analyst program, which is a three-year program with at that time, at one test given each year you have to pass those to be success with tests.

Scott:                                    01:52                     And the pass rate was somewhere around the 30 or 40% range. Three years later, I had that certification, and in 1993 I was named the portfolio manager for our large-cap growth fund, which had a one-star rating by Morningstar, which was the lowest star rating they gave. It was a poor performing bottom of the barrel fund. And I was challenged to come up with a strategy that made sense that could resurrect the mutual fund. And unfortunately, despite having an MBA in finance and having the CFA under my belt and having taught a review program in the evening for CFA candidates for this on behalf of the security analyst society of San Francisco, I felt frankly naked that I wasn’t prepared to manage a mutual fund. And the reason was through all the material and thousands of pages of assigned readings for all those programs, all of that was all of the readings were academically oriented, written by professors who never actually managed money.

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Systematic vs. Nonsystematic Risk

Systematic and nonsystematic risks are pervasive concepts in the CFA curriculum and understanding them is critical to portfolio management concepts. The take away from this article should be that while certain risks are unavoidable, others can be diversified away through proper portfolio diversification. Below is a quick summary for reference before we get into the explanations and examples for each.

Systematic Risk

Systematic risk is always present in the market and is attributable to natural and general risks that affect the economy and the prices of all securities in the market. Any factor that affects the prices of all securities in the market could be considered a systematic risk.

These systematic risks can range from economic to political and as can be seen in the list as examples below, they all focus on the big macro picture. This is by no means an exhaustive list of all the systematic risk possibilities and it is important to remember that any macro factor that affects the prices of all securities in the market could be considered a systematic risk.

Examples of Systematic Risk: interest rate hikes, inflation, economic cycle downturns, foreign currency exchange rates, tax reform, foreign trade policy, war, and large natural disasters.

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IFB125: Using the Bid-Ask Spread to Buy Zero Commission Stocks (over ETFs)

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:                                    00:35                     All right folks, we’ll welcome to the Investing for Beginners podcast episode 125 tonight. Andrew and I are going to continue our ongoing discussion about the no commission news that hit the stock market last week, and we had some other additional thoughts that we wanted to share with you about a couple of different topics. So the first one we’re going to talk about is something that I broached with Andrew earlier this week, and we’ve talked a little bit about it off air and we thought this would be something that might be of interest to you guys and see if it was something that might help you with your investing. So the thought that I had was, how is this going to affect ETFs? And the reason why I thought that was because before when you would go on ally, for example, and buy an ETF, let’s say a VOO, which is an ETF that tracks the top of P E an S and P 500 has got 516 stocks, I believe.

Dave:                                    01:38                     So it tracks the majority of the S and P plus a few extras. So what’s to stop you from doing something a little bit different? So in the past, when you buy this particular ETF on ally, you would pay four 95 for your trade like everybody did for any other stock. And then, during the year, the ETF would also charge you a fee to manage and operate the ETF for you. Now in this particular case, it’s a 0.3, so it’s quite small, but it’s; still, it’s money that is taken from your returns at the end of the year. And so my thought was, is now that you don’t have to pay that four 95, why would you pay for the commission on not the commission, but why would you pay the management fee on the ETF? And my thinking was is that you look at, when you look at an ETF, you can see a breakdown of what it is that they are holding in that ETF.

Dave:                                    02:43                     And in this particular case they’re holding the top 10 stocks that are in their particular portfolio are some pretty big hitters. It was, let’s see here, we got Microsoft, Apple, Amazon, Facebook, Berkshire Hathaway, JP Morgan, alphabet class a and C stocks, Johnson and Johnson and Procter and gamble. And it tells you what the weighting of all those are. And that’s 21% of the whole portfolio that they hold in this ETF. And I thought to myself, well, why wouldn’t I buy those stocks individually? Cause now I don’t have to pay for them. It doesn’t cost me to buy all 10 of those stocks other than obviously buying the shares and spending the money on the shares. But if you’re looking to build a portfolio, for example, what’s to stop you from just looking at this and buying all 10 of those stocks and it costs you nothing to manage it, and it costs you nothing to invest in them initially.

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