Investing

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Invest in Facebook IPO?

posted in Investing

Should you invest in the Facebook IPO?   Very soon, some say as early as May 18, Facebook will be filing for its Initial Public Offering. Last Thursday, it was learned that the share price will be in the $28-$35 per share range. This could amount to the largest IPO in history and value the company at nearly $100 billion. So what does it mean to say Facebook could be a $100 billion dollar company? It seems like a lot, so to help put it in perspective I looked at the value (Market Cap) of the 30 stocks that make ...

diversify mutual funds

How You Diversify your Assets

posted in Investing

Previously I talked about why you should diversify your assets. Now the question arises: How can you diversify?   Well, there are three main ways to diversify. Buy a lot of single stocks, invest in mutual funds, or invest in ETFs. The first option is the least likely to be successful, because of how many transactions you would have to take to get a decent portfolio. If it costs $9.95 per stock transaction, both to buy and sell, then a decently sized portfolio ( around 20 stocks) would cost you $200 to create. Of course there are discounts available to new ...

Diversify Stock

Why you should diversify your assets

posted in Investing

Investing is risky. We all know that. One of the techniques to reduce the risk is to diversify the assets we invest in. If our assets are diversified, their values will not move in correlation.  This is great, because if one of your asset is tanking, your other assets will not affected as much; thus, balancing out your losses. Let’s explore this concept further. “Don’t put all your eggs in one basket.” The great thing about this proverb is that it also applies to finance.  If you put all your money in company A and it goes into bankruptcy, you ...

401k

What is a 401k

posted in Investing

 Signing up for a company sponsored 401k is a great way to invest money. What is a 401k? It is a retirement savings plan which has favourable tax outcomes; the captain gains, dividends, and interest earned within the 401k are not taxed until withdrawn. That sounds too good, so what is the catch? You can only make withdraws, without penalty, after 59 1/2 years of age. Let us explore more on what a 401k is. If your company sponsors a 401k plan, then the odds are you are already in it. Most companies have automatic enrollment, and you can only ...

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Two Types of Investors: Active & Passive

posted in Investing

There are two types of investors in this world – active & passive. An active investor believes he can achieve better returns than the market indexes, which track the overall market. In contrast, passive investors embrace market indexes, and thus want their returns to mimic the market; if the market returns are good, a passive investor’s returns will be as well.  I am the latter type of investor. I believe that investing in indexes will have a greater long term return than investing with active management. If you think you can actively manage your portfolio, you are brave. Beating the ...

time value of money

The Time Value of Money

posted in Investing

Investing is all about compounding over time; if you put in x amount today what will get you get tomorrow. This concept is extremely important to investors. In fact, first thing you learn in Finance 101 is the time value of money.  The formula is as follows: Future Value = Present Invested Amount * (1+Interest Rate )^Time The most important valuable factor in this equation is time. So if you start saving sooner rather than later, you will have more time to let your money compound. Here is an example. Guy A starts saving when he is 20. While the ...

Investing Stock Picture

Stock? Is that like a type of wood?

posted in Investing

Alright let’s cover the basics of what a Stock is and why you would want to buy one.  Stock is essentially a contract drawn up that entitles you to a % ownership of a company.  Why would you want that? Let me see… to get dividends and capital gains.  Why does a company sell stock? They sell stock to raise money, because they need money to expand or they sell stock because initial investors want to sell their shares at a wonderful price.  Essentially, you buy stock to get richer and companies sell stock so they can raise money and ...