Hello Everyone!
Today at 2:00 the Federal Reserve confirmed that they will continue buying $85 billion in bonds for a few more months, but plan to wind down their purchases to zero by the end of 2014. What does this mean for your money? Two things. First, the bond market may slowly return, as yields rise. However, this could mean that some investors will leave the stock market, causing prices to fall. On the positive side, by having the Fed leave the market, the economy can work towards becoming "normal" again. By normal I mean a market that is not artificially held up. Many investors would argue that every gain since 2009 has been artificial. This will hopefully lead to a more stable market (including bonds) even if we have to deal with short term losses. Be sure to follow me on twitter @andrewciatto
Wednesday, June 19, 2013
Tuesday, June 18, 2013
7 Helpful Investing Resources
Hello everyone!
Today I will explain how I use some of the "Investing Resources" that I have listed on the left side of the page. The best link that I can steer you towards is Investopedia.com. This website has something for investors of all levels. It provides 1 minute videos explaining countless aspects of investing. There is also an investing term dictionary which provides the dictionary definition and the "Investopedia Definition." Finally, Investopedia has a stock market simulator where you can test investing strategies.
Yahoofinance.com is most useful for it's real-time content, either news, stock prices, or charts. However, once you type in a ticker symbol, on the left hand side, there is a link called "Analyst Opinion." This link tells you how many analysts cover that stock, whether they rank it as a buy or sell (1.0 = buy, 5.0 = sell), and their price targets for the stock.
Googlefinance.com has a useful tool called "Stock Screener." This tool allows the user to input specific criteria that they are looking for in a stock, and Google will match you with the results. It is also one the most well organized tools for tracking your portfolio.
The Motley Fool, fool.com , is a great link for finding how thousands of other investors feel about the same stocks that you do. This can be found in their "CAPS Community"
Of course a compound interest calculator is nice for projecting returns, but it is impossible to predict the future.
Twitter is good for the speed in which you can receive news.
Reddit.com/r/investing is a forum in which you can post questions and read other interesting information. It is like a giant bulletin board.
Today I will explain how I use some of the "Investing Resources" that I have listed on the left side of the page. The best link that I can steer you towards is Investopedia.com. This website has something for investors of all levels. It provides 1 minute videos explaining countless aspects of investing. There is also an investing term dictionary which provides the dictionary definition and the "Investopedia Definition." Finally, Investopedia has a stock market simulator where you can test investing strategies.
Yahoofinance.com is most useful for it's real-time content, either news, stock prices, or charts. However, once you type in a ticker symbol, on the left hand side, there is a link called "Analyst Opinion." This link tells you how many analysts cover that stock, whether they rank it as a buy or sell (1.0 = buy, 5.0 = sell), and their price targets for the stock.
Googlefinance.com has a useful tool called "Stock Screener." This tool allows the user to input specific criteria that they are looking for in a stock, and Google will match you with the results. It is also one the most well organized tools for tracking your portfolio.
The Motley Fool, fool.com , is a great link for finding how thousands of other investors feel about the same stocks that you do. This can be found in their "CAPS Community"
Of course a compound interest calculator is nice for projecting returns, but it is impossible to predict the future.
Twitter is good for the speed in which you can receive news.
Reddit.com/r/investing is a forum in which you can post questions and read other interesting information. It is like a giant bulletin board.
Saturday, June 15, 2013
Why should I reinvest my dividends?
Hello everyone!
Today I will discuss the importance of reinvesting your dividends in the great company that you identified and now own. A dividend is a quarterly or annually distribution of a portion of a company's earnings(Investopedia). Often times, investors are paid a quarterly cash dividend, and don't think about it as much more than that. However, a wise investor would look to set up a Dividend Reinvestment Plan (DRIP). In this "plan," the shareholder requests that his quarterly dividend be paid directly in stock rather than cash. This eliminates an additional transaction in which you have to contact your broker with the same order each time you receive a dividend payout. As you will see in a minute, by increasing your number of shares every three months, you significantly increase your returns. Let's look at two different investors: Steve and Carl. Steve and Carl both make a $10,000 investment in McDonald's(MCD). For our sake let's assume that McDonald's costs $100 per share (actually 98.42). Both investors want to hold their 100 shares for 30 years without selling, or spending any additional money to increase their holding size. However, Steve wants to reinvest his dividends, while Carl wants to use his dividends to go out to a special restaurant every 3 months. Unfortunately Carl does not realize that he is severely restricting the amount that his investment can appreciate. If McDonald's stock price does not increase in the next 30 years, Carl will be left with a $9,390* profit simply from dividends...not bad (nearly a 100% gain). Steve will make far more money than Carl since he wisely reinvested his dividends. Here is how Steve accomplished such a feat...First Steve had 100 shares, but each quarter he had a few more shares since he used his dividends to buy more shares of McDonald's. Then Steve had more shares that paid him a dividend, so he had even more money the next quarter, to buy more shares! This snowballed in an account value worth $25,000! Nearly $6,000 more than Carl's $19,930*. Now imagine they had made these investments when they were teenagers and were actually planning to hold for 60 years! Carl again would be left with his $10,000 initial investment plus $19,860 (dividends). Here is where Steve's wise investment pays off...Steve's account will be worth $63,500! More than double Carl's account value. REMEMBER! Steve accomplished this with McDonald's stock price never increasing over 60 years! Amazing! The reason that Steve was able to do this was because after 60 years he had accumulated 635 shares of McDonald's stock while Carl still had his 100 shares.
Use this link, and see how important dividends are to you!
http://loanlane.com/divcalculator2.php
MAKE SURE YOU SCROLL DOWN AFTER PRESSING "CALCULATE"
*$9,390 = ($3.13 Dividend per Share) x (100 shares) x (30 years)
*$19,930 = $9,930 (from dividends) + (10,000 initial investment)
Today I will discuss the importance of reinvesting your dividends in the great company that you identified and now own. A dividend is a quarterly or annually distribution of a portion of a company's earnings(Investopedia). Often times, investors are paid a quarterly cash dividend, and don't think about it as much more than that. However, a wise investor would look to set up a Dividend Reinvestment Plan (DRIP). In this "plan," the shareholder requests that his quarterly dividend be paid directly in stock rather than cash. This eliminates an additional transaction in which you have to contact your broker with the same order each time you receive a dividend payout. As you will see in a minute, by increasing your number of shares every three months, you significantly increase your returns. Let's look at two different investors: Steve and Carl. Steve and Carl both make a $10,000 investment in McDonald's(MCD). For our sake let's assume that McDonald's costs $100 per share (actually 98.42). Both investors want to hold their 100 shares for 30 years without selling, or spending any additional money to increase their holding size. However, Steve wants to reinvest his dividends, while Carl wants to use his dividends to go out to a special restaurant every 3 months. Unfortunately Carl does not realize that he is severely restricting the amount that his investment can appreciate. If McDonald's stock price does not increase in the next 30 years, Carl will be left with a $9,390* profit simply from dividends...not bad (nearly a 100% gain). Steve will make far more money than Carl since he wisely reinvested his dividends. Here is how Steve accomplished such a feat...First Steve had 100 shares, but each quarter he had a few more shares since he used his dividends to buy more shares of McDonald's. Then Steve had more shares that paid him a dividend, so he had even more money the next quarter, to buy more shares! This snowballed in an account value worth $25,000! Nearly $6,000 more than Carl's $19,930*. Now imagine they had made these investments when they were teenagers and were actually planning to hold for 60 years! Carl again would be left with his $10,000 initial investment plus $19,860 (dividends). Here is where Steve's wise investment pays off...Steve's account will be worth $63,500! More than double Carl's account value. REMEMBER! Steve accomplished this with McDonald's stock price never increasing over 60 years! Amazing! The reason that Steve was able to do this was because after 60 years he had accumulated 635 shares of McDonald's stock while Carl still had his 100 shares.
*Price is kept constant at $100 over 60 years.
*Dividend remains $3.13 per year or $.7825 per quarter
|
Carl
|
Steve
|
Initial Investment
|
$10,000
|
$10,000
|
Number of Shares (Year 1)
|
100
|
100
|
Account Value (30 Years)
|
$19,930
|
~$25,000
|
Account Value (60 Years)
|
$29,860
|
~$63,500
|
Number of Shares (Year 60)
|
100
|
635
|
Use this link, and see how important dividends are to you!
http://loanlane.com/divcalculator2.php
MAKE SURE YOU SCROLL DOWN AFTER PRESSING "CALCULATE"
*$9,390 = ($3.13 Dividend per Share) x (100 shares) x (30 years)
*$19,930 = $9,930 (from dividends) + (10,000 initial investment)
Identify a Great Company!
Hello Everyone!
Although these last few weeks in the market have been rocky, this has been a very bullish year. Now is a great time to discuss how to identify a superior company. In a bull market, finding such a company will maximize your returns. In a more bearish market, finding a great company will be crucial to limiting your risk of losses. Everyone invests differently, and may have different opinions, but here is how I identify a company as a buy target.
Although these last few weeks in the market have been rocky, this has been a very bullish year. Now is a great time to discuss how to identify a superior company. In a bull market, finding such a company will maximize your returns. In a more bearish market, finding a great company will be crucial to limiting your risk of losses. Everyone invests differently, and may have different opinions, but here is how I identify a company as a buy target.
- You can explain how this company makes money
- You could explain why you want to buy the stock
- There is a catalyst that can boost the company's growth
- Consider how strong/weak the company's competitors are
- Well recognized (brand name)
- Does not have to constantly spend money to change their product
- Fair price-earnings valuation
- Reasonable dividend
- Strong leadership
- A strong balance sheet
Although I have outlined these investing principles, not every great company fits this criteria. For example, Google does not pay a dividend, and spends money to revamp what they do. Thanks for reading and keep investing! Be sure to subscribe, so that you can receive these posts directly in your inbox!
Follow me on Twitter @andrewciatto
Thursday, June 13, 2013
First Post!
Hello Readers,
In today's edition of intelligent investing I will be sharing a few of my investment strategies. First of all, I always invest based upon a theme. Let's look at our current economic situation; investors are gaining confidence, and they are selling their "stable" stocks in exchange for more cyclical investments. Your theme for this investing period could be "Recovering Economy." At this time, I too would be looking to pick up some high-growth stocks for my portfolio. One such stock would be Boeing (BA). Although I am not telling you to go purchase some shares of Boeing, it is a perfect example of a cyclical grower. In 2008, when the market collapsed, Boeing was one of the hardest hit companies. Since Boeing makes airplanes, when the consumer was not spending very much money on travel, airlines did not need more, or newer, planes. Thus, Boeing did not have orders to fill. However, Boeing has come roaring back (150%) since the crash, because airlines need newer planes, and more of them! Now I encourage you to maybe look elsewhere for growth since Boeing has run up a lot. But stay investing with a theme! One theme that I have personally considered, but am not necessarily recommending, is investing in companies that belong to the "financials" sector. I like this theme for two reasons. 1. Most specifically, banks have refocused on their core business since the market collapse. Many have sold off "less relevant" parts of their businesses. Also, although the S&P500 and the Dow Jones Industrial Average have set all-time highs, these financial companies are not even close to their 2008 highs. That means their is plenty of growth left in the tank. Thanks for reading and continue investing!
Follow me on Twitter @andrewciatto
In today's edition of intelligent investing I will be sharing a few of my investment strategies. First of all, I always invest based upon a theme. Let's look at our current economic situation; investors are gaining confidence, and they are selling their "stable" stocks in exchange for more cyclical investments. Your theme for this investing period could be "Recovering Economy." At this time, I too would be looking to pick up some high-growth stocks for my portfolio. One such stock would be Boeing (BA). Although I am not telling you to go purchase some shares of Boeing, it is a perfect example of a cyclical grower. In 2008, when the market collapsed, Boeing was one of the hardest hit companies. Since Boeing makes airplanes, when the consumer was not spending very much money on travel, airlines did not need more, or newer, planes. Thus, Boeing did not have orders to fill. However, Boeing has come roaring back (150%) since the crash, because airlines need newer planes, and more of them! Now I encourage you to maybe look elsewhere for growth since Boeing has run up a lot. But stay investing with a theme! One theme that I have personally considered, but am not necessarily recommending, is investing in companies that belong to the "financials" sector. I like this theme for two reasons. 1. Most specifically, banks have refocused on their core business since the market collapse. Many have sold off "less relevant" parts of their businesses. Also, although the S&P500 and the Dow Jones Industrial Average have set all-time highs, these financial companies are not even close to their 2008 highs. That means their is plenty of growth left in the tank. Thanks for reading and continue investing!
Follow me on Twitter @andrewciatto
Wednesday, June 5, 2013
Welcome!
Hello potential readers of this blog!
Starting June 14th, I will be updating this blog regularly, with the intent of growing wealth together! I will constantly be sharing my views of the stock market, but under no circumstances am I a stock broker, so I can not be held responsible for any investments that you make that go down, nor take credit for those that you act on, and go up. However, I also know that the best investment, is one in knowledge. Therefore I wish to make you financially literate, so that you have the skills and tools to build your own wealth. To all of those who have read this, thank you, and I am excited to begin!
Follow me on Twitter @andrewciatto
Starting June 14th, I will be updating this blog regularly, with the intent of growing wealth together! I will constantly be sharing my views of the stock market, but under no circumstances am I a stock broker, so I can not be held responsible for any investments that you make that go down, nor take credit for those that you act on, and go up. However, I also know that the best investment, is one in knowledge. Therefore I wish to make you financially literate, so that you have the skills and tools to build your own wealth. To all of those who have read this, thank you, and I am excited to begin!
Follow me on Twitter @andrewciatto
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