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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.




The Growth/Value Barbell Portfolio Explained: Pros and Cons

As the growth stocks vs value stocks debate rages on, and value investing undergoes an almost two decade run of underperformance to growth, a new type of stock strategy has gained popularity: the barbell portfolio strategy.

The barbell portfolio strategy is a simple concept; a balanced portfolio containing both growth and value stocks. Like a barbell, the weights of these stocks should counterbalance for adequate exposure to both.

Becoming strategy agnostic when it comes to stock picking can be extremely valuable for several reasons, which we’ll discuss in this post.

But there’s also some downside risk to a barbell portfolio, which we will discuss too.

This post is divided into 6 sections, with each building on the previous:

  1. Growth vs Value Investing Background
  2. Pros of the Barbell Strategy
  3. The Evolution of Growth/Value
  4. Cons of the Barbell Strategy
  5. The Most Critical Aspect of Portfolio Strategy
  6. Common Sense Application of a Barbell Portfolio

Growth vs Value Investing Background

There are many camps of stock pickers, but among the two most popular are “growth investors” and “value investors”.

Typically, each investing style shares common characteristics.

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Which Investing Strategy is Better – Value vs. Growth Stocks!

I feel like anytime I listen to an investing podcast or turn on CNBC, everyone is talking about how insane the market has been right now. It seems like now more than ever, in the crazy year of 2020, people are talking about this epic battle of value vs. growth stocks.

While this debate does seem front and center right now, it’s definitely not a new phenomenon but rather something that has gone on literally for years. People seem to always fall on one side of the fence – either you’re going to invest in growth stocks or you’re going to invest in value stocks, and it seems like the two lines seem to never get blurred.

First, let me start off by explaining what value stocks and growth stocks even are before we start debating value vs. growth stocks.

Investopedia always is my go-to for definitions and learning new terms, so I thought it was best to use their definition of value stocks stating,

“A value stock refers to shares of a company that appears to trade at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.”

On the other hand, they define growth stocks as,

“A growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends. This is because the issuers of growth stocks are usually companies that want to reinvest any earnings, they accrue in order to accelerate growth in the short term. When investors invest in growth stocks, they anticipate that they will earn money through capital gains when they eventually sell their shares in the future.”

After just reading the two definitions, I immediately thought of my recent blog post on Apple where I talk about their dividend history. While it’s not some crazy 50+ year period like Johnson & Johnson (JNJ) or 3M (MMM), they still do have a growing dividend over the recent history.

But don’t people invest in Apple because it’s a stable company with crazy returns? How can a company with great returns also pay a dividend…maybe this means the lines aren’t as clear as we think! 😉

I found a nice little chart that shows some of the differences of growth and value stocks in an easy to comprehend way, compliments of The Difference Between:

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Introducing Business Movers

In Wondery’s newest series, Business Movers, host Lindsay Graham dives deep into the inner workings of some of the most successful companies of all time. From the origin stories of their famed leaders to the million-dollar idea that catapulted them to success, how exactly did these companies grow from an idea and a dream to multi-billion dollar corporations? Hear the landmark decisions, the scandals, and the stunning triumphs that made them who they are. First up: Walt Disney. Listen at http://wondery.fm/investing_movers

Building Great Stock Screeners like the Pros: A Guide to Build Popular Ratios

Using stock screeners as part of your investment process is a critical step to beating the market as it will uncover great and unique investment ideas! Without using screeners, investors are prone to fall victim to herd mentality investing, where they are only being exposed to already popular investment ideas through various media sources instead of doing their own independent research.

Using a little algebra within screeners, investors can combine minimums or maximums for various fundamental metrics in order to only bring up stocks that meet popular rule-of-thumb investment criteria such as the PEG ratio and Investors’ Adjusted ROE, which this article will use as examples.

eInvesting for Beginners has a comprehensive guide on how-to use screeners with a great how-to video from Andrew on using Finviz (a free online tool!). Many online brokers also supply investors with screening tools within their platform as part of their overall product package, so take a look at what screening tools your brokerage offers too.

This article is the next step in using screeners and will get more advanced by teaching investors how to combine various fundamental metrics in order to build popular rule-of-thumb ratios in order to further narrow down the search for great investment opportunities!

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IFB183: Investing in the 40s, Bond Allocation, Early Roth Withdrawals

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

  • How to invest in 40s, with an aggressive mindset
  • Asset allocation and Bonds
  • How Roth IRAs work and options for early withdrawals
  • Having dry powder for special circumstances

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

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Transcript

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. 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. This is episode 183 tonight. Andrew and I are going to read some great lists for questions we got from our guests. And we’re going to go ahead and do our little give and take. So I’m going to turn it over to my friend, Andrew. And he’s going to go ahead and read the first question.

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5 Tangible Steps for You to Increase Income to the MAX!

As you likely know, there are really two different ways for anyone to save money – you either have to cut your expenses of increase your income, and I’m ready to go in depth with ways to increase your income!

Of course, there are other ways like winning the lottery, receiving an inheritance, or robbing a bank – but if I were you, I wouldn’t bank on any of those… get it?!

Wait, sorry, but really quick – why did the banker fall asleep?

….

Because they lost INTEREST! HA!

Ok, sorry – I’ll stop with my lame jokes.

If you have read any of my previous posts, I am a huge advocate for decreasing your spending as a first step over increasing your income for a few different reasons:

1 – It’s Faster

You can literally stop spending money now. Like today. Delete your Amazon app. Stop ordering pizza and look through your pantry. Do you have green beans, rice and some frozen meat? There you go – that’s a dinner. You just used stuff you had instead of $20 on pizza.

Are you going to go out with friends tonight? Why not invite them over, grab a $8 6-pack of beer and play card games? $8 for a 6-pack instead of paying $4/beer + tip, plus an Uber there and back…easily looking at a $30 night at the minimum.

There are a ton of ways that you can just quickly stop this unnecessary spending if you really think about the ways that you’re simply just blowing cash.

2 – It’s Easier

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Having Investing Paralysis by Analysis? Start with a SWOT Matrix!

If you have ever had to create a SWOT Matrix for a school project then I am guessing that you are probably triggered by even reading the title of this blog.

Guess what – I don’t blame you!

Truthfully, I am too. I hated doing any sort of SWOT Matrix and it just seemed like a complete waste of time. I actually had a class where we just did a ton of competitive analyses like this and I honestly didn’t think there was a legit benefit to the class whatsoever, until recently…

SWOT stands for Strengths, Weaknesses, Opportunities & Threats. You’re basically trying to summarize the outlook for the company into a nice, concise chart.

Sounds like something that might be useful for investing, right?

When I am looking for companies to invest in, this is basically the exact type of thing that I will do.

My first step typically is some sort of qualitative data like this where I am trying to find companies that do something really well, with few competitors, and look like they’re on a path for long-term, sustained success.

Of course, I will also run these companies through the Value Trap Indicator to make sure that the metrics qualify the company as a potential buy but I will almost always start with the qualitative aspect.

I feel like if you can properly identify and complete a company’s SWOT Matrix then you’re going to have a huge leg up when you’re investing in that company because you’re challenging yourself to look beyond the low-hanging fruit and actually understand the company a little better.

For instance, let’s take a look at this SWOT Matrix for Apple from the Business Strategy Hub:

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Biofuel Industry Overview: Stocks to Watch (Biodiesel and Renewable Diesel)

Some of the hottest renewable energy stocks which are working to fight climate change can be found in the biofuel, or biodiesel and renewable diesel, industry.

Learning about this complicated industry can be a challenge especially if you have no background in the energy sector, so I will attempt to do a complete breakdown from a beginner’s viewpoint, so that you can analyze the many biofuel, biodiesel, and other related stocks to this high potential industry.

When diving into an industry as interwoven into a large sector (energy) as biofuel, it’s important to get as granular as possible with your understanding.

Unfortunately, major conglomerates with many segments and vertical integrations such as those you’ll see in the energy sector don’t usually provide detailed breakdowns into the entirety of each segment. Even if they do, it’s not often they will provide detailed outlooks and explanations about each market—this would take hundreds of pages for a conglomerate like ExxonMobil.

And to be clear, the difference between the markets for one piece of an industry, such as natural gas, can be completely different from one like biofuel, even though the end uses are very similar (and biodiesel can even be different from biofuel!).

So to get great information about a specific industry and market within a larger one, such as the semiconductor industry among tech giants or various renewable energies among oil majors, it helps to first analyze a company that is a “pure play” in a specific market.

In other words, to get a good grasp of the biofuel industry, we will examine one of the smaller companies who are primarily focused on this market.

From there, we can backtrack to examine the bigger players when it comes to picking an investment, but the understanding and circle of competence comes from learning from as close to a pure play company that you can find, regardless of how small it is.

A company who fits this definition perfectly is one called Renewable Energy Group (ticker: $REGI). Let’s pull up the company’s latest 10-k in order to glean as much information on the industry as we can.

From the company’s first couple of sentences in their business overview:

We focus on providing cleaner, lower carbon transportation fuels. We are North America’s largest producer of advanced biofuels. We utilize a nationwide production, distribution and logistics system as part of an integrated value chain model designed to convert natural fats, oils and greases into advanced biofuels.

I’ve bolded what I thought to be a key sentence in there, and will start our base of knowledge into our biodiesel industry map.

The Basics of the Biofuel Industry: Key Definitions

Before we completely dive into the extensive 10-k, let me set the table with a few simple, yet key and distinct definitions that we’ll come across during this industry breakdown.

First, biofuels and biodiesels.

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Should Investors Care if a Stock gets Delisted?

With all the fanfare going on in the news about Chinese stocks being delisted from U.S. exchanges, many investors are currently wondering what will happen to their shares… Don’t fret, a stock holding being delisted is not the end of the world, especially for small retail investors with little need for liquidity.

This article will discuss some of the implications of a stock being delisted, with particular notes concerning Trump’s executive order regarding certain Chinese companies, but is not investment or legal advice by any means.

Your Ownership Interest Still Exists in Delisted Stocks!

While the shares might no longer be traded on the largest exchanges, they are still an ownership interest in the underlying company and can be traded “over-the-counter” (OTC) outside of the major exchanges. This is still done electronically through your brokerage account. In the olden days, companies used to grant stock certificates to investors (and some still do so for a small fee as a fun gimmick!) and these shares could be taken to different markets or countries and traded in various venues.

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Improving a Company’s Efficiency with Supply Chain Network Optimization

If you have ever seen an episode of Shark Tank, I guarantee you have heard the sharks bring up questions like, “what do you need us for”. And I feel like the top three answers are always the contacts, the leadership, and the assistance in their supply chain network optimization.

It’s not hard to find a manufacturer or a distributor for your company, but it’s very hard to find one that’s going to be a true partner and work to keep your costs low and make you more successful.

Getting the supply chain network hammered out is imperative as a new company, but the “optimization” aspect is less important in my eyes. You just want to make sure that these companies are making your product correctly, without defects, and keeping costs low. As you grow, that’s when you’ll start to actually focus on getting the process optimized.

Think about with a company like Amazon – time is money! They promise 2-day shipping on so many products and if they don’t hit that, you can actually get a refund from Amazon for it.

Let me say this again – If you’re a paying Amazon Prime member and you buy a Prime item with 2-day shipping, and the package doesn’t show up in 2 days, you can get some money back in return for that. I know it’s annoying to track that, so just download Paribus – they’ll tell you when it happens and provide a cut-and-paste text to get you your money.

Sorry for the side rant, but I wanted to help all my readers, and most importantly teach you something – time is money…literally.

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