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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.
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When I first started reading Money Master the Game by Tony Robbins, I honestly thought the book was starting off like it was a motivational speaker/salesy, but I am starting to really get hooked on the data that Tony is giving us. I was skeptical at first as I noted in my first post but in this recent chapter, Tony starts to give us his 9 Financial Myths that we need to be aware of, and after reading Myths 1-3, my main takeaway is that you better know your total expense when investing.
What exactly do I mean by this?
Well, let’s just say that expenses are the ultimate killer when it comes to investing. Do you like math? I love math. Let’s have math show us what I mean.
What’s the best way to get started in the market. Download Andrews ebook for free @stockmarketpdf.com. I love this podcast because it crushes your dreams and getting rich quickly. 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 step-by-step premium investing guidance for beginners. Your path to financial freedom starts now.
All right, folks, we’ll welcome to the Investing for Beginners podcast. Tonight. We have a special guest with us. We have Ashley Clark from Sense 2 Cents, the brains, and the beauty behind the brand. She’s got a great story, and she’s got a great product line and awesome, awesome stuff that she’s doing to help teach people about finance, which is, of course, our passion. So Ashley, tell us a little bit about yourself and kind of what you got going on.
I am Ashley Clark, CEO and founder of Sense 2 Cents. Since I live in born and raised in Savannah, Georgia. I started my career as a banker. I was a banker for 11 years at their most recently being able to retire from my nine to five as, since the census. Now my full-time baby, thanks to amazing people, wanting to know more about financial alert, literacy, and learn what their children. I provide the tools to make teaching financial literacy fun for both the parents and the children. It’s a family event. And we’re having fun. The money talk is not a talk that you’re going to be afraid to have with your children because the sense, the sense
That’s awesome. Yeah, that’s what we want. As somebody who has a young one myself, I know that trying to have that conversation has been challenging. So I guess where do we start as somebody? I have a, I have an eight-year-old daughter growing on 15 and, and Andrew does, Andrew does as well. And so, where do you start? How do you, how do you start this
Underwriting is a process that essentially involves a company or group of people that are willing to take on a certain amount of risk in exchange for compensation or a service. You likely are familiar with underwriting in the insurance industry, but it is also very common in investing with the underwriting of shares.
Essentially, the company is trying to determine a certain value that they deem as being fair for the amount of risk that they’re about to take on. As I mentioned, this really hits home in the insurance industry.
When you’re applying for car insurance, you have to answer many questions about your age, driving history, gender, type of car, and many other things because the insurance company is trying to get a feel for the type of risk that they’re taking on by insuring you.
If you’re a 16-year old boy that’s driving a red Ferrari, you’re going to pay more than a 40-year old woman with four kids in a minivan. One of these people are statistically more likely to get into an accident, and while I only have one son, I can honestly say that four kids might actually make me think the mom would be more likely…just kidding!
There are many different types of underwriters in the world today as you can see below from InvestingAnswers.com, but of course, we’re all here to talk about the underwriting of shares!
Underwriting of shares is different but the same common denominator is the same – those that are doing the underwriting are determining a true market value of the risk that they’re going to take on.
I am fortunate enough that my 8-5 job offers me a pension, something that is very unique to companies nowadays, but not super uncommon in the oil industry that I work in. Last year, I had a good friend leave the company and he was debating about using a pension withdrawal to fund a down payment on their new home… good idea or not?
Truthfully, at that time I really didn’t have a great grasp on how pensions worked but I knew at a minimum he was going to have to pay tax and I assumed that there was going to be some sort of fees involved, similar to how there are fees if you withdraw your gains from an IRA before the age of 59 ½.
Simply with the understanding that there were going to be fees and tax, I told him that it was a bad decision. And since I wasn’t well-versed on the topic at that time, I said he should talk to his advisor, or even Fidelity who the pension was through, to get their advice as I assumed that he could likely roll it over into a different retirement account to avoid all of those fees and taxes.
But here’s the thing – was my “gut instinct” advice correct? Well, let me first define what a pension is for those that are unaware. Investopedia defines it as “a retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit. The pool of funds is invested on the employee’s behalf, and the earnings on the investments generate income to the worker upon retirement.”
It might sound similar to a matching 401k contribution but there are some major differences between the two as shown in the chart below by ClydeBank Media:
The easiest way to think of it, at least in my eyes, is that your employer is basically giving you a “retention bonus” based on how long you stay with the company. The amount that you get is based off your salary and doesn’t require you to contribute anything, but the longer that you stay with the company and the more you make, the more that they will pay you when you terminate employment.
When you do decide to terminate employment, if you’re of the proper age you can then withdrawal that pension as a lump sum or take monthly payments, as shown below by The Balance Careers:
“Most of the top-ranked business schools around the world do not understand margin of safety. For them, low risk and low returns go together, as do high risk and high returns. Over a lifetime, we all encounter scores of low-risk, high-return bets. They exist in all facets of life. Business schools should be educating their students on how to seek out and exploit these opportunities.”
The margin of safety is associated with value investors as they seek to find companies selling for less than their value and scoop them up at a discount. But the margin of safety is also a mindset; you try to find companies to buy that have characteristics that allow you to relax while owning them.
Many associate margins of safety with investing, but it can apply to other areas of life, such as buying a house. For example, if you buy a home in an area that is declining in value, no matter the price you pay for the home, your ability to recoup your initial investment declines as the property values in your area decline.
Some of my favorite investors talk about building margins of safety into their investments, investors such as Warren Buffett, Charlie Munger, Mohnish Pabrai, Terry Smith, Chuck Akre, and Joel Greenblatt.
All of the above use different margins of safety to find profitable investments for their firms, plus others that follow them.
Operating margin is probably the most useful profitability ratio because it’s much less volatile than net margin, but includes all operating expenses to run a business (which gross margin doesn’t).
Obviously we want to see increasing operating margins over time. But how’s an investor to know if a company’s general levels of operating margin are good or not?
That’s where this post comes in; we will examine average operating margin from 20 years of S&P 500 data, and hopefully gain a valuable tool on comparing companies and their profitability.
Introduction to Operating Margin
The operating margin formula is the following:
Operating Margin = Operating Income / Revenue
Remember that all margins formulas are trying to describe how much $1 in sales will convert to either gross profit (gross margin), operating profit (operating margin), or net profit/ income (net margin).
So, how do we calculating operating income?
Most of the time you should be able to find operating income in a company’s consolidated income statement wedged in between the top line (revenue) and bottom line (earnings). It’s also sometimes denoted on the income statement as EBIT (earnings before interest and taxes).
You can also derive operating income from revenue by subtracting the following:
Operating Income = Revenue – Cost of Goods Sold – Other Operating Expenses
Where, Other Operating Expenses = SG&A, (selling, general, and administrative) R&D (research and development), and D&A (depreciation and amortization).
Let’s take a business that’s easy to quantify and show how to denote the difference between operating expenses and other expenses in the income statement.
Have you ever found yourself sitting in lie at a store and suddenly you see it – the item that you never knew you wanted and now you have to have it! So, you buy that Coke, Doritos, Snickers, etc., just because it was convenient. You didn’t need it, you wanted it. It’s an easy trap to fall into, and that’s why it’s imperative to understand the impulse buying definition.
For the “book” definition, I think that the Economic Times says it best, “Impulsive buying is the tendency of a customer to buy goods and services without planning in advance. When a customer takes such buying decisions at the spur of the moment, it is usually triggered by emotions and feelings.”
Personally, it happens to me every time that I go grocery shopping on Sunday mornings. The last thing that I walk by before I get in line to checkout is that little rotisserie chicken area. Do you know what I am talking about?
It’s this little stand that has premade rotisserie chickens that I can just grab and go.
While the chickens are good, they’re not something that will make me salivate, but do you know what they do? They save me time!
I just spent my Sunday morning grocery shopping. The last thing that I want to do is go home and cook to have lunch ready. Instead, why not just buy one of these chickens and then I can just put some of the meat and lettuce into a tortilla and call it a day. Seems easy enough to me!
And sometimes I am literally waiting in line for a half hour to checkout – now I am really mad and don’t want to cook. Fine, I’ll buy one.
Do you realize what I just did? I fell prey to impulse buying. I bought something that wasn’t on my list purely because the emotions got the best of me. I started to think about how nice it would be to save that time so I simply just opted to take the easy way out.
But here’s the thing – I meal prep every single week for my wife and I. So, I didn’t really save time. All that happened is that now I don’t have to cook our grilled chicken for the week before Sunday lunch but rather just need to have it done Sunday night to make lunches for the week.
So… I saved myself like, 5 hours. Or, procrastinated by 5 hours is really the better way to say it, and I had to PAY to do it!
I love this podcast because it crushes your dreams and getting rich quickly. They 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 step-by-step premium investing guidance for beginners. Your path to financial freedom starts now
All right, Folks, welcome to the Investing for Beginners podcast. Tonight, we have episode 192; we’re going to go back to our listener questions and read a few great ones that we got recently and do our little give and take and answer them. So I’m going to go ahead and read the first question. It’s a bit long, but there are some important parts here. So bear with me for a moment. So I have; Hi Andrew, I’m a new avid listener and a fan of your podcast because investing just seems smart. And I want to know everything. I’m in my early twenties and want to start that slow growth drip style. However, this sparked a conversation between my boyfriend and I seeing as, as the stock market is about to crash and inflation is soaring. He thinks it would be incredibly dumb to begin now because I wouldn’t put in enough initially to survive the crash with my means; I would be looking at investing between 50 to $150 a month.
So my question for you is what would happen if I had $150 worth of a stock that went to zero and below, would it ever come back when the market slowly returns, or would that money be wasted? You’ve always mentioned that the stock market always returned stronger and that even people who invest in bad times come out ahead, do the froth in the market, but my boyfriend. So that’s only if enough is invested and not to lose the stock entirely. Do you think it is wise or stupid to begin investing now in the current economic state for slightly more detail, he said. A better idea would be investing in myself right now and increasing that active income assets or otherwise just saving the money since the liquid value slash stocks won’t have value in upcoming months as a young one with a 20 and $20 an hour full-time job and an apartment.
Publicly traded healthcare REITs can be an interesting opportunity for investors in the stock market because they have dual exposure to two favorable themes: real estate and healthcare spending.
Exposure to both themes are attractive to investors because (1) the real estate market can sometimes diverge from the stock market, making it a good investment in some bear markets, and (2) aging baby boomers and expanded life expectancies are driving higher demands for healthcare spending.
There’s various types of REITs (Real Estate Investment Trusts) within the healthcare space which generally profit from these trends, including:
General acute care hospitals
ER/ urgent care facilities
Medical office building (MOBs)
Skilled-nurse facilities (SNFs)
Other outpatient facilities
And within these main types of buildings/ real estate, there’s a variety of ways that the REITs themselves can make money.
A REIT can own and operate a facility, simply own the land and task the tenant with operating and maintenance costs, or provide additional financing options on top of standard tenant agreements.
When a REIT owns the land but requires its tenants to maintain the property and pay associated expenses such as taxes and insurance, this is called Triple Net Leasing, or NNN. Investors looking at healthcare REITs may prefer the NNN model as it frees up capital for the REIT to expand, rather than having to tie it up in its properties. Of course, there’s risks associated with NNN, which REITs work to mitigate during its regular course of business.
Many landlord-tenant agreements in the healthcare space tend to be long term (5-15+ years) and have steady rent increases (“escalators”) within the agreement.
These rent escalators can either be fixed or tied to an index such as the inflation-indexed CPI.
Why Would a Hospital, Medical Office, or Facility Want to Use a REIT?
One of the biggest mistakes that I oftentimes will see people make is that they will not take full advantage of their 401k match. Honestly, I think that this mistake can have many, many years of potential repercussions, but it makes me wonder – what actually is the average 401k match?
Before we get too far down the rabbit hole, let me first explain what a 401k is. A 401k is a tax-advantaged plan that is commonly offered by employers for their employees to use as a retirement savings account. Essentially, the employees are given the option to either use a Traditional 401k meaning they put in pretax dollars, a Roth 401k meaning its after-tax dollars, or a blend of the two.
The #1 benefit of a 401k is that typically, the employer is going to offer you some sort of matching contribution based on the amount that you put into the 401k. So, for example, they might offer you a 1:1 match up to 5% of your salary.
This means that if you make $52K/year and you get paid weekly, then every week you will basically gross $1K before taxes, insurance, etc. So, let’s pretend that you’re a great money mind and are fluent in the language of money and put 5% in your 401k.
This means that every single week, you’re going to automatically have 5% of your salary taken out and put in this account. For simplicity purposes, let’s assume you’re using the Traditional 401k, so it will be 5% of $1K since it’s a pretax contribution, thus meaning that you will be putting in $50 and your employer will also put in $50 because they’re matching you.
Not a bad deal, right?!
Basically, you invested $50 (a tax-advantaged $50 at that!) and you got another $50 in your account for free. BOOM!
But what if you thought you could only invest 3%? That means you put in $30 and your employer also puts in $30. So, you’re going to get another $20 in your check, or really about $15 after taxes, and you’re foregoing $40 later in your life, $20 from your savings and $20 from your employer.
Sounds like a bad deal, right? Why would you want to turn down that free money?
We will get into that a little bit later 😊
When I was doing research finding the typical matching 401k contributions for employers, I came across this amazing study that was compiled by Vanguard based on their own data, and it truthfully was a little bit depressing.
I think that I have always somewhat had blinders on when it comes to employers matching their employee’s contributions and truthfully, thought it was much more common and much higher than what is actually true.
Below shows the most common types of matching with by far, the most common being 50% for every percent up to 6%, meaning your employer would match 3% if you put in 6%: