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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 13,800+ 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.

IFB96: Limit Order vs. Market Order and other Listener Q&A

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginning led by Andrew Sather and Dave Ahern too decode industry jargon, silence, crippling confusion and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now.

Dave:                                    00:36                     All right folks, we’ll welcome to be Investing for Beginners podcast. This is episode 96. I am back this week after missing last week. I’m sorry guys, but I had pneumonia and Andrew was kind enough to help me out so I didn’t have that coughing, hacking everybody’s ears, uh, during the, during the episode, so I appreciate it. Andrew, take it over for me last week tonight we’re going to talk about some questions from our listeners. We got another great batch of questions and a couple of testimonials there. We thought we’d read those to you guys on air and inner and I can go back and forth and answer some questions. So Andrew, why don’t you go ahead and read the first one to it and we’ll start talking.

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Using Return on Invested Capital (ROIC) to Evaluate Stocks

One of the most core elements of great investing is understanding what Return on Invested Capital (ROIC) means, and how it can be used to evaluate a company as a potential investment.

This is a guest contribution by Cameron Smith.

Guest bio: Cameron Smith is a CPA, CMA (Chartered Professional Accountant, Certified Management Accountant) from Toronto, Canada.

Cameron has an Honors Bachelor of Business Administration degree from Western University’s Ivey Business School where he had the opportunity to be taught value investing at the university’s Ben Graham Centre for Value Investing and to meet Warren Buffett in 2012.

On the side of his career in corporate finance, Cameron maintains his passion for value investing through being an active author and contributor on Seeking Alpha (author page: https://seekingalpha.com/author/cameron-smith#regular_articles).

ROIC is one of the more advanced pieces in investing in my opinion, as it is a little more complicated than your standard Price-to Earnings ratio. However, ROIC’s meaning is in many ways more valuable—as it gets to the bottom of what the capital of ALL investors, both contributors of equity capital and debt capital, can expect to earn from a business.

Knowing this ratio, investors can then ask tough questions ranging from “is this a good business to put my capital into?”

“What type of yield will my capital return in this business?” “Is the yield is too low, and if so, am I paying too much for the capital of this business?”

“How should the return be split between debt and equity holders?”

“Can the business take on more leverage?” ‘Is the business too leveraged?’ “Could this business ever be profitable or is it a lemon?’

From an internal management perspective, ROIC can be used by management to evaluate if their company’s shares are trading below what their capital is able to earn, and if so, should management repurchase shares with excess cash flow rather than investing in lower yielding growth projects?

Side Note: This is why I always take share buybacks as a good sign from a business and its management. It shows that management is on the ball and is doing a good job of maximizing shareholders return through smart allocation of capital. Also, it shows that the business is able to earn an excess return to be shared with equity investors.

Breaking down ROIC, there are two separate elements: 1) Return and 2) Invested Capital. It is important to get familiar with these items first before delving into its interpretation.

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IFB95: Real Estate, Annuities, and Dividend ETFs with Kenny Robinson

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginning 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.

Andrew:                              00:36                     Welcome to the Investing for Beginners. episode 95. Today Dave is under the weather so it’s just going to be me, but we have a guest today. His name is Kenny Robinson and I’m really excited to have him on. Kenny’s a fulltime diversified investor. You might have heard about him from his youtube channel called the Kenny Robinson channel and he’s got a lot of cool things I’ve, I’ve checked out several of his videos is I’m really excited to get perspective, particularly around dividends and dividend ETFs. A, if you’ve been listening to the show at any length of time, you know how excited I get about dividends and I think we can have a really fun conversation. So Kenny, thanks for coming on and joining us today.

Kenny:                                  01:21                     Yeah, I’m, I’m very excited to be here on the podcast and, uh, hopefully we can definitely talk about some excellent ETFs and dividends in general. So yeah, let’s, let’s do it.

Andrew:                              01:32                     All right. Let’s start, you know, you are fulltime diversify the investors. So what does that mean to you? I know we talked a little bit off the air and you said you do some investing outside of dividend ETFs. So, uh, what does that mean as far as the whole circle of kind of what you do with your investments?

Kenny:                                  01:53                     That’s a great question. So, uh, the, the core of my portfolio, so to speak, my overall asset base, a lot of it is publicly traded, meaning, you know, in, in the public markets, the stock market and bond market, dividend, ETFs. But as a true diversified investor, I also think it’s important to have a portion of your net worth outside of the public markets and private placements. Um, you know, regulation d type of private real estate investment trusts, as well as I also buy and sell physical real estate in person. Uh, so there’s, there’s several different things that I do that bring me that type of passive income, a different LLCs and businesses, but the lion’s share is publicly traded. So I think it’s important. It helps me sleep at night personally, right? Everyone’s a little bit different. But I think if someone has a diversified pool of assets that, you know, generating income for them, uh, not only, uh, via the sock market, but also a private placements and real estate for example. That’s a very, very good example where, uh, the, the whole keyword with diversification is also a uncorrelated, right? You don’t want all your eggs in one basket, so to speak. Um, so not only does that mean buying different stocks within the stock market, but also deriving some passive income from, excuse me, assets outside of the public market. Uh, so not only is asset allocation important, but I truly believe in asset location as well. Um, so, so I would say in a nutshell, that’s, that’s really what I referred to when I say diversified.

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IFB94: Is Buying at a 52 Week High a Bad Idea for Value Investors?

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:                                    00:36                     All right folks, we’ll welcome to the Investing for Beginners podcast. This is episode 93 tonight we’re going to discuss it. Buy and sell rules. Well actually we’re going to discuss buy rules. We recently got a great listener email that wanted to chime in on his ideas of some by rules. Andrew and I have discussed those several times in a podcast. Episode 32 we discussed buy and sell rules and that was really popular. And then we also touched on those as well with Braden in episode 88 and so we’ve got this great listener email that I mentioned and we wanted to talk about his bye bye rules. So Andrew, why don’t you go ahead and read the first by rule and then we can talk about it a little bit.

Andrew:                              01:21                     Yeah, sure. So obviously super inspiring. I think it’s really cool when people who are listening to our stuff take it and run with it. I’ve said that before. So the first viral that, um, this is Daniel f first viral that Daniel, um, shared with us is it must score under 250 on the Vti and must file a readable tank k that demonstrates good finances that indicate I am getting a bargain. Do you agree or disagree? I definitely agree. Yeah, me too. That one’s easy. Next,

Dave:                                    01:57                     next a must pay a dividend and allowed directly reinvestment a drip grows as investment. Well that’s kind of a no brainer. Yeah, it’s got to pay a dividend and it’s got allowed direct reinvestment cause that’s how we grow our wealth.

Andrew:                              02:10                     Your thoughts? Yeah. Uh, can we talk about drip every single episode?

Dave:                                    02:15                     I think I would be so extended if we did that every single time we would be. Because you are the DRIP king after all,

Andrew:                              02:24                     I always buy stocks with paying a dividend. It’s how you get compound interest. You need an income at northern to reinvest and make that money compounds. So how do you do that? While you can buy stocks and get them to drip and as you do that, whether the stock market goes up, down or sideways, you’re going to be collecting those dividend checks and then if you reinvest them you are slowly accumulating a greater and greater percentage of a company or a business. One of the things I shared today on on the page I was having some back and forth was with some people on there, excuse me, and I was trying to explain from a very basic beginner premise what compound interest is and and trying to explain it to somebody who kind of has no idea, like no concept of it because it’s one thing for us to say it and, and as Dave and I, we’ve been doing this teaching this for years, right?

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IFB93: Investing in a Low Interest Rate Environment with Vitaliy Katsenelson

Dave:                                    00:00:36               All right folks, well welcome to Investing for Beginners podcast. Tonight we have a very, very special guest with us. One of my favorite writer, thinkers and investors. His name is Vitaly Katsenelson and he is the CEO of the IMA firm based out of Colorado and he has a fantastic blog. It is one of my favorites that really, really has helped me learn and grow so incredibly much. It’s called the Contrarian Edge. If you do not already subscribed to it, you need to, it’s fantastic. So without any further ado, I’m going to go ahead and get us started that you don’t want to hear me talk. We want to hear Vitaly talk. So Andrew, why don’t you go ahead and ask the first question and we can go ahead and chat a little bit.

Andrew:                              00:01:15               Yeah, thanks Vitaliy, for joining us. And, I’m also a big fan. I’m currently, it was actually good timing because I’m in the middle of reading your Sideways Markets book. Just so happened to be reading that when I reached out to see if you want to do an interview. We’re obviously a show that’s very focused on beginners and we like to talk about value investing and trying to buy stocks– buying low, selling high. So when you think, how do you think about value investing because that’s one of the things that you like to talk about. You’re a value investor, you’d like to think about investing. So do you approach the actual topic of value of investing differently? Do you see it as like a numbers game? Do you see it as maybe a mixture of both? How would you go about approaching the idea on the topic of value investing?

Vitaliy:                                  00:02:09               Well, first of all, Dave and Andrew, thank you very much for having me. I’m looking forward to this. All right. I think value investing is usually misunderstood. And let me explain why. Ben Graham wrote the Bible of value investing The Intelligent Investor and when most people read this book, they get would they get out of this? They get this recipe and the recipe is basically this: buy cheap stocks. And I think they get the wrong message out of this though. The recipe is part of the book. The bigger message of the book is really, it’s a value investment philosophy. It’s something I go through in my six commandments. But basically value investing is a philosophy where you say, and let me just go through a few of those six commandments. Stocks are not piece of paper their businesses.

Vitaliy:                                  00:03:04               You would analyze a stock the way you would analyze a business. Risk is not really the volatility of the stock market, but a permanent loss of capital. When the stock price declines and never comes back. Mr. Market is there to serve you and not the other way around. So this was the just three commandments out of six and implore your listeners, go to Investor.FM, where they can listen to all six commandments, which of the basic excerpt from a chapter of the book that I’m working on, that’s the point number one about investing. Value Investing is a philosophy and not just the recipe of buying kind of stocks to trade at 10 times earnings or less because if that’s all it was, then you can just have a computer do value investing and it’s not even good computer because all you have to do is count to 10, right.

Vitaliy:                                  00:04:04               If the PE is less then buy, so you don’t have to be that smart. And also the other part, it’s the kind of the Ben Graham’s recipe kind of, just by statistically cheap stocks is a very one dimensional because it only focuses on kind of on price. But you also have two other dimensions, which is basically quality and growth, right? Quality is a very important dimension because if you have a high quality company that basically that has a strong competitive advantage that basically guarantees you that the cash is in the future will be there, that’s very important. And Growth, there’s a lot of value in growth because Google is a lot more valuable today than it was 10 years ago because it’s earnings up, I don’t know, 5x or 10x since then. So there was a lot of value has been created by Google, you know, growing as an example. So if you focus just on statistical price and ignore the quality and growth you are really missing out on a lot.

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IFB92: A Refresher Episode on Some Investing Basics

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 and Dave, too 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, well welcome to Investing for Beginners podcast. This is episode 92, tonight Andrew and I are going to read some listener questions and take a few minutes to answer those. This is going to be kind of a refresher episode on some basics, so things that we haven’t talked about a while. I wanted to give everybody kind of a refresher on some of those and also to help some people that are just joining the podcast now that might feel like they might be a little bit overwhelmed.

Dave:                                    01:01                     So I thought we thought this would be a great time to talk a little bit about some, some of the old basics because that’s always the foundation for everything you ever want to do. So with the first one, Andrew, you’re going to go ahead and read the first question and then we’ll talk a little bit about that.

Andrew:                              01:17                     Yeah. Uh, and I’ll also add the disclaimer if you’re brand new and this is something where you’re an absolute beginner and you’re looking to get some really basic stuff. Obviously listen continuously in this episode, but we also have a couple of series that we’ve done that are basically targeted towards people who, you know, might not know anything about investing, personal finance or any of those sorts of things. So starting on the episode for the three, we have what we called back to the basics and that’s a five part series, getting you an introduction on stocks, Wall Street, other sorts of investments, why investing works, how it works. Well, there’s some easy ways to implement it. And then starting in episode 60, we did a personal finance series, also five part, talking about some of the basics. We get into like some of the nitty-gritty there where it’s like, okay, well what kind of account do I open if I want to invest?

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Aggressive Stocks and Their Potential to Be a Portfolio Killer

Buying aggressive stocks is often considered the best way to make money in the stock market, especially by the general public. Often, these are the types of stocks that the average investor DOES make money buying in the short term, and will tell others about.

In this post I’m going to talk about about a particular brand of aggressive investments: growth stocks.

And while there’s truth to the statements above, it doesn’t mean that these are the types of stocks that the average investor should be looking into.

You can take many aggressive growth stocks from the past as proof.

The 1990s had lots of examples of this.

There was a headline by Investor’s Business Daily saying “Overvalued? Not if the Stock Keeps Rising.” It was talking about a company called Just for Feet Inc, that once traded at a trailing P/E of 396. A growth stock that IBD was arguing wasn’t overvalued.

The justification was that although the stock “might have looked pricey by some standards”, they countered that “investors who limit themselves to common measures of value, such as trailing P/E’s, would have missed Just for Feet– and just about every other leading growth stock”. 

Well IBD, that’s the whole point.

The stock went from $4 at a P/E of 396 and grew earnings enough to trade at a 58 P/E at $28, only to crash down to less than $1 in 3 years.

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IFB91: Buying Bank Stocks and Marijuana 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 and Dave 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                     Welcome to Investing for Beginners podcast, this is episode 91. Andrew and I are going to take a moment and answer listener questions. We’ve got some that are some great questions that we’ve had in our bank, and we wanted to take a few moments and answer those for you guys. So Andrew, why don’t you go ahead and read it. The first question?

Andrew:                              00:55                     Yes sir. So this is a great question from Michael B. we’re going to split it up because there are two different questions here. So let’s tackle this first one. Hi Andrew. I used your VTI every week. I love it. I’m here in Canada. The banks are the most common stock to rise steadily and had decent dividends, but because of their equity, they would never score well in the VTI. I know you aren’t a big fan of financial institutions, but Dave is, and I could care less either way, but based on trends in Canada, most banks are still selling that less than $100 a share which based on their EPS increasing consistently in the dividends increasing regularly.

Andrew:                              01:36                     I want to jump on the bandwagon now. Braden mentioned the banks and both of his last interviews with you too. I don’t know which valuations I need to focus on with a company that makes the most money. The higher their debt is. Thirteen of Canada’s dividend aristocrats are financial institutions, nine of which are banks. I’m not sure if I’m chasing my tail here, trying to convince myself they’re a good buy or not, but I do rely heavily on your VTI spreadsheet because it does take a lot of guesswork out of the quantitative information. I love to hear any insight if you have any, so anything jp out at you real quick, Dave, before we draw swords and start fighting each other, I guess. No, I want to. I want to have you draw your sword first, and then I’ll give a rebuttal.

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Questions You Need to Ask Yourself When Learning How to Invest $100k

Investing, and money, is absolutely NOT one size fits all. Ask someone how to invest $100k, and you’ll get a different idea (or 10). Like fitness and diet, everyone has their own special way of doing it that works for them.

So instead of bombarding you with more useless ideas, why don’t we try to solve the blessing of having $100k to invest with some basic personal questions/ reflections.

Sure it takes a little more effort, but it’s better than blindly following someone’s idea and giving up on it before it can make you a good return.

What does $100k mean to you?

Again this sounds a little woo-woo, but it’s very important in deciding how to invest the $100k. You should ask yourself:

  • How much money do you make
  • How much money do you have saved
  • How frequent will you invest a similar sum
  • When do you anticipate needing the money

This is very important, because not only does it help you determine your goal for the money but it can also identify your risk tolerance.

For example, someone who makes $25,000 a year with no savings and received the $100k as an inheritance will have a much different view on the money than someone who brings in $1,000,000 per year and is looking to invest $100k every 6 months.

The person with the inheritance might be much more conservative with their money than the person who makes $1 million/year, because that sum of money means more to them and their overall financial situation.

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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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