Daily Investment Advice

Category: Education Center

What is Technical Analysis? Top 5 Technical Analysis Indicators for Beginners
Technical analysis is a method used to evaluate securities such as stocks, currencies, and commodities by analyzing statistics generated by market activity, such as price and volume. It involves using charts and other technical indicators to identify patterns and trends that can be used to predict future price movements. Technical analysts believe that all relevant information about a security is reflected in its price and that market psychology can be used to forecast future price movements. Technical analysis can be used in conjunction with fundamental analysis, which analyzes a company’s financial statements and other qualitative factors, to make investment decisions.

Technical analysis can help traders determine the direction of a trend and whether it is likely to continue or reverse, which in turn can help traders identify potential entry and exit points for trades. As such, technical analysis can assist traders with the specific timing of their trades, by helping to identify short-term price movements and potential buying or selling opportunities.

Technical analysis can also be used to help manage risk, due to its use when thinking about specific price points to place stop loss orders, to protect against losses. Furthermore, by focusing on objective data such as price and volume, technical analysis can help remove emotions from investment decisions and provide a more systematic approach to trading.

As technical analysis can provide a quick overview of an asset’s price movements and help uncover potential trading opportunities, it is typically used by short term traders such as swing traders and day traders.

It is important to note that technical analysis is not bulletproof and is often used in conjunction with other forms of security analysis, such as fundamental analysis. Additionally, different analysts may interpret the same chart differently, and technical analysis can be subjective. Nonetheless, technical analysis can be a useful tool for traders and investors who are looking for subjective data in their research to identify potential opportunities.

6 Common Technical Analysis Chart Patterns

When it comes to specific chart patterns, there are many patterns that technical analysis uses to try and predict where an asset may be headed next. Some of the most common chart patterns associated with technical analysis include the following:
1. Trendlines – these are diagonal lines that connect the highs or lows of an asset’s price movements, and can help determine the overall trend of the asset.
2. Support and resistance levels – these are price levels where an asset has historically found support (buying pressure) or resistance (selling pressure), and can help determine potential buy or sell zones.
3. Moving averages – these are lines that smooth out an asset’s price movements by averaging out past price data, and can help identify the direction of the trend.
4. Head and shoulders – this is a pattern that forms when an asset’s price rises to a peak (the “head”), falls, rises again to a higher peak (the “shoulder”), and then falls again, and can indicate a trend reversal.
5. Double and triple tops/bottoms – these are patterns that form when an asset’s price rises to a certain level (the “top”) multiple times before falling, or falls to a certain level (the “bottom”) multiple times before rising, and can also indicate a trend reversal.
6. Flags and pennants – these are patterns that form when an asset’s price has a sharp move up or down, followed by a period of consolidation where the price moves in a narrower range, and can indicate a continuation of the previous trend.
In addition to specific chart patterns, technical analysis often relies on technical indicators as well, which are used to analyze past price movements of a financial asset to predict future trends. Listed below are 5 common technical analysis indicators that are often used by technical analysts.

5 Technical Analysis Indicators to Consider
1. Moving averages: A moving average is an average of a security’s price over a certain period of time. The most common moving averages used in technical analysis are the 50-day, 100-day, and 200-day moving averages.
2. Relative Strength Index (RSI): The RSI measures the strength of a security’s price action by comparing its gains to its losses over a specified time period. It is used to identify overbought and oversold conditions.
3. Bollinger Bands: Bollinger Bands are a volatility indicator that consists of a moving average and two bands that are plotted above and below the moving average. The bands widen and narrow based on the volatility of the security’s price.
4. Moving Average Convergence Divergence (MACD): The MACD is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price.
5. Fibonacci retracement: This is a technical analysis tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction. It is based on the idea that prices tend to retrace a predictable portion of a move, after which they will continue to move in the original direction.
Summary

Technical analysis can be helpful tool of evaluating assets such as stocks, commodities and other assets by looking at factors such as price and volume. Although it is not a bulletproof method, there are many technical indicators and chart patterns that can be utilized or studied when it comes to using technical analysis to assist with making informed trading and/or investment decisions. Hopefully, you now have a better understanding of technical analysis and how it can assist you when researching and analyzing potential assets to buy or sell.
May 5, 2023
Understanding the Different Types of Stock Market Orders for Beginners – Limit, Market, Stop, etc.
When it comes to investing in the stock market as a self-directed investor, it’s important to familiarize yourself with the different types of orders that can be placed to buy and sell stocks and exchange traded funds (ETFs).

Rather you plan to become a long-term investor or trader, its important to consider the difference between a limit order, market order, stop order and the different variations in between, so that you can know which orders will be applicable to each type of strategy you intend to implement for your portfolio.

So, let’s get started discussing the different types of stock market orders out there and for which situations they are applicable.

Limit Order

A limit order is a type of order placed with a brokerage to buy or sell a security (such as a stock or bond) at a specified price or better. The specified price is known as the “limit price,” and the order will only be executed if the market reaches or exceeds the limit price.

For example, if an investor wants to buy shares of a company but only wants to pay a certain price for those shares, they could place a limit order to buy those shares at the specified price or lower. If the market reaches or falls below the specified price, the order will be executed and the shares will be purchased.

Likewise, if an investor wants to sell shares of a company but only wants to sell them at a certain price, they could place a limit order to sell those shares at the specified price or higher. If the market reaches or exceeds the specified price, the order will be executed and the shares will be sold.

Limit orders are useful for investors who want to control the price at which they buy or sell a security and can help prevent them from overpaying or underselling. However, it’s important to note that limit orders may not be executed if the market doesn’t reach the specified price, so investors should consider the potential risks and benefits before placing a limit order.

Market Order

A market order is a type of order placed with a brokerage to buy or sell a security (such as a stock or bond) at the current market price. Unlike a limit order, a market order is executed immediately at the prevailing market price, and the order is filled as soon as possible.

For example, if an investor places a market order to buy shares of a company, the order will be filled at the current market price, which may be higher or lower than the price at which the investor initially saw the stock. Similarly, if an investor places a market order to sell shares of a company, the order will be filled at the current market price, which may be higher or lower than the price the investor initially saw the stock.

Market orders are useful for investors who want to buy or sell a security quickly, without waiting for a specific price. However, it’s important to note that market orders may not be filled at the exact price the investor expects, particularly in fast-moving markets or with stocks that have low trading volume. As a result, market orders may carry more risk than limit orders.

Stop Order

A stop order is a type of order placed with a brokerage to buy or sell a security (such as a stock or bond) once it reaches a certain price, known as the “stop price.” Once the stop price is reached, the stop order is converted into a market order and executed at the prevailing market price.

For example, if an investor wants to buy shares of a company if the stock price reaches a certain level, they could place a stop order to buy the shares once the stop price is reached. If the stock price reaches the stop price, the stop order is triggered and converted into a market order, which is executed at the prevailing market price.

Likewise, if an investor wants to sell shares of a company if the stock price reaches a certain level, they could place a stop order to sell the shares once the stop price is reached. If the stock price reaches the stop price, the stop order is triggered and converted into a market order, which is executed at the prevailing market price.

Stop orders are useful for investors who want to limit their losses or protect their profits. For example, an investor might place a stop order to sell shares of a company if the stock price drops below a certain level, in order to limit their potential losses. Alternatively, an investor might place a stop order to buy shares of a company if the stock price rises above a certain level, in order to protect their profits or limit their potential losses if the stock price continues to rise.

It’s important to note that stop orders do not guarantee a specific execution price, particularly in fast-moving markets or with stocks that have low trading volume. In addition, stop orders may be subject to slippage, which occurs when the market price of a security changes rapidly between the stop price and the execution price of the market order.

Stop Market vs. Stop Limit

A stop limit order is a type of order placed with a brokerage to buy or sell a security (such as a stock or bond) once it reaches a certain price, known as the “stop price.” Once the stop price is reached, the stop order is converted into a limit order, which is executed only if the security can be bought or sold at the specified limit price or better.

For example, if an investor wants to buy shares of a company if the stock price reaches a certain level, they could place a stop limit order to buy the shares once the stop price is reached. If the stock price reaches the stop price, the stop limit order is triggered and converted into a limit order, which is executed only if the shares can be purchased at or below the specified limit price.

A stop market order, on the other hand, is a type of order placed with a brokerage to buy or sell a security once it reaches a certain price, known as the “stop price.” Once the stop price is reached, the stop order is converted into a market order, which is executed at the prevailing market price.

For example, if an investor wants to buy shares of a company if the stock price reaches a certain level, they could place a stop market order to buy the shares once the stop price is reached. If the stock price reaches the stop price, the stop market order is triggered and converted into a market order, which is executed at the prevailing market price.

The key difference between a stop limit order and a stop market order is the type of order that is executed once the stop price is reached. A stop limit order is executed as a limit order, which may offer more control over the execution price but carries the risk of the order not being filled if the limit price is not met. A stop market order, on the other hand, is executed as a market order, which ensures that the order is filled but may result in a less favorable execution price if the market is moving rapidly.

Short Selling Order Types

Short selling is a trading strategy where an investor borrows a stock from a broker and sells it in the market, hoping to buy it back at a lower price and return it to the broker, pocketing the difference in price as profit.

To sell a stock short, there are two types of orders that can be used:
1. A short sell market order: This is an order placed with a brokerage to sell a stock short at the current market price. Once the order is filled, the investor immediately borrows the shares from the broker and sells them in the market.
2. A short sell limit order: This is an order placed with a brokerage to sell a stock short at a specific price or better. Once the order is filled, the investor immediately borrows the shares from the broker and sells them in the market.
It’s important to note that short selling carries significant risk, as there is no limit to how high a stock’s price can rise, which means that the potential losses from short selling can be unlimited. Short sellers must also pay interest on the borrowed shares, which can increase the cost of the trade. For these reasons, short selling is generally considered to be a more advanced trading strategy, and is not recommended for novice investors.

Summary

In summary, there are various types of orders that can be used when trading stocks, including limit orders, market orders, stop orders, short sell market orders, and short sell limit orders. A limit order is an order to buy or sell a security at a specified price or better, while a market order is an order to buy or sell a security at the prevailing market price. A stop order is an order to buy or sell a security once it reaches a certain price, known as the stop price. A stop limit order is executed as a limit order once the stop price is reached, while a stop market order is executed as a market order. Short selling involves selling a borrowed stock in the market, and can be executed using a short sell market order or a short sell limit order. It’s important for investors to understand the risks associated with each type of order and to use them judiciously based on their individual trading goals and risk tolerance.
May 5, 2023
3 Online Discount Stock Brokers to Consider for Beginner Investors

When it comes to opening a brokerage account as a beginner investor, it’s important to find a broker that can offer the investment choices and services that you will need to help you achieve your specific investment goals and objectives.

Especially as a new investor, it’s important that you choose a broker that aligns with your investing/trading strategies, and allows you the ability to execute those strategies with ease.

Additionally, it’s important to understand both the different services your broker offers, and how this could potentially assist you in the future, should your investing objectives or goals change. For example, is the brokerage purely self-directed, or do they offer advisory and/or portfolio management solutions as well?

All things considered, let’s take a look at some different online discount stock brokers, and exactly what they have to offer in terms of the services, fees/commissions, account features, and other factors. Here are 3 online, discount stockbrokers to consider if you are a new to the market:

1. Charles Schwab

Charles Schwab is a full-service broker, offering self-directed options for active traders and individuals who want to take control of their money and “own their tomorrow”.

Schwab also offers a wide range of investment advisory services, including personalized financial advice and guidance for your portfolio, recently announced thematic ETFs (exchange traded funds), and they also offer their own in-house ETFs and mutual funds.

Like most brokerages these days, Schwab offers $0 commissions for online equity/stock and ETF trades, (just $6.95 for OTC stocks), and a .65 per contract standard rate for options.

Click here to Open an Account with Charles Schwab

2. Fidelity

Like Schwab, Fidelity offers clients self-directed options and the ability for you to self-direct your portfolio for $0.00 per buy and sell trade for exchange listed stocks, along with the choice for individuals to have their money managed by an Advisor, with full-service wealth management and advisory services.

Fidelity also has their own in-house ETFs and mutual funds clients can choose to invest in, and like Schwab, Fidelity makes it easy for clients to self-direct their portfolios, offering the ability to invest in a wide range of assets including stocks, options, bonds ETFs, mutual funds, etc.

Commissions are also $0 for online equity/stock and ETF trades, and their standard options commission is just .65 per contract.

Click here to open an account with Fidelity

Robinhood

Unlike Schwab and Fidelity which we just discussed, Robinhood does not have any managed solutions as of right now and is a full discount broker that charges $0 commissions for stock/equity trades, and $0 commissions for options as well. The fact that Robinhood charges $0.00 for placing options trades is one benefit vs a broker like Schwab or Fidelity.

However, what you are giving up in exchange for paying absolutely nothing in terms of commissions for any type of trade, is that Robinhood is a discount brokerage house and doesn’t offer the managed solutions, portfolio guidance and other financial advisory services for your portfolio, which would come standard with many other brokerage houses.

Additionally, although Robinhood allows access to trade stocks and exchange traded funds (ETFs), they do not support trading of mutual funds or bonds. Depending on your investment goals and objectives, this might not matter to you, but it is something to consider.

Thus, Robinhood can be a good choice for someone who is looking to self-direct their portfolio, and only wants to invest in stocks, options, ETFs and/or cryptocurrencies. Also, I have heard individuals say that Robinhood’s interface is very easy to use, which would definitely be considered a plus if you are new to the stock market and don’t want to deal with an overly complicated platform.

Click here to open an account with Robinhood

To Summarize

These are some good choices if you’re looking for a broker to begin your trading and/or investing journey. Rather you are looking for managed portfolio guidance, or a completely self-directed portfolio, hopefully this has given you some valuable information in terms of where you could potentially invest your money and what each broker has to offer.

May 4, 2023
Mutual Fund Investing for Beginners: 5 Things to Consider Before Buying Your First Mutual Fund
When it comes to investing in mutual funds, they are similar to ETFs in that there are thousands to choose from and they can invest in a wide variety of assets depending on the specific strategy of the fund.

However, there are some key differences which need to be discussed, and in this post I want to explain exactly what to look for if you’re new to invest in mutual funds.

What are mutual funds?

Mutual funds allow you to pool your money with other investors and buy a diversified collection of assets in the process. Mutual funds can invest in various assets including stocks, bonds, real estate and even other indexes and funds (known as “funds of funds”).

By investing in a mutual fund, you can build yourself a diversified portfolio of assets based upon your risk tolerance and investing goals.

For example, a mutual fund could invest in 100 different individual stocks and have thousands of investors pooling their money into the same fund, which is used as the capital to purchase those 100 companies. Another mutual fund could perhaps invest in real estate investment trusts (REITs) or even bonds. Either way, you are pooling money with other investors to build a diversified collection of assets and hopefully realize a positive return.

With all this being said, let’s get into some things you should consider before buying into a mutual fund. shed right on the front page at .04% (or just 4/100ths of 1%) and there are no other hidden fees associated with the fund.

5 Things to Consider Before Buying Your First Mutual Fund:
1. Your financial goals: Before investing in a mutual fund, you need to determine your financial goals. Are you investing for short-term goals such as a down payment on a house or a vacation? Or are you investing for long-term goals such as retirement? Understanding your goals will help you choose the right mutual fund that matches your investment objectives.
2. Risk tolerance: Every investment has a level of risk, and mutual funds are no exception. You should understand the level of risk you are comfortable with and choose a mutual fund that aligns with your risk tolerance. For instance, if you are risk-averse, you may want to consider investing in a balanced fund that has a mix of stocks and bonds, whereas if you have a high risk tolerance, you may opt for an equity mutual fund.
3. Fees and expenses: Mutual funds come with fees and expenses that can eat into your returns. You should read the fund’s prospectus to understand the fees and expenses associated with it. You may want to choose a low-cost fund that has a low expense ratio, which can help you maximize your returns.
4. Fund manager: The fund manager plays a crucial role in the performance of a mutual fund. You should research the fund manager’s track record, experience, and investment style before investing in the fund. You want a fund manager who has a good track record and a consistent investment style that aligns with your investment objectives.
5. Diversification: Diversification is an essential aspect of investing. Investing in a mutual fund that is well-diversified can help reduce your overall investment risk. You should choose a mutual fund that has a mix of stocks, bonds, and other securities that align with your investment objectives and risk tolerance.
By considering these five factors, you can make an informed decision about which mutual fund to invest in and increase your chances of achieving your financial goals. For more information on mutual fund investing, including our most recent mutual fund picks, click here!
May 4, 2023
Options Trading for Complete Beginners in 2024
The broad definition of an option is a derivative contract against an asset such as a stock, land, car, or something else, that gives you the right, but not the obligation, to buy or sell the asset at an agreed upon price over an agreed amount of time.

To give you a practical example of what an option is, you can think about buying a piece of land. If you wanted to have the right, but not the obligation to buy the property, you could reach out to the owner and request that they give you the option to buy the land over perhaps the next 30 days.

Once you agree upon a price with the owner (say $500 for the option), you sign the options contract, pay the money (the premium), and from that point forward, over the next 30 days, you have the exclusive right to purchase that property at any time for the agreed upon price. Once the option expires, so does the right to buy the property, at which point you could enter into perhaps another agreement with the owner, or simply move on.

Worst case, you’ve guaranteed yourself the ability to purchase the land for an agreed upon price, and you’re out $500. At any time within the 30 days of the contract, you call the owner to exercise the option, at which point you purchase the land for the agreed upon price.

This is probably the simplest way to understand options. It is simply a right that gives you the ability to take action (buy or sell) an asset within a specified time frame. As the buyer of an options contract, it’s important to remember that you are never forced into taking any action. Rather, you have the choice to take action for as long as the options contract is valid (up until the expiration day).

Index funds are a way to build exposure to the broad market for a low cost. They provide instant diversification and the ability to invest in a wide variety of assets within a single investment product.

When it comes to index funds, however, not all of them are created equal. Some index funds will track different indexes and invest in assets besides just stocks, while others may have higher costs and may be more or less diversified.

That’s why I wanted to discuss five index funds today that can widely diversify your portfolio for a low cost, across the entire U.S. stock market. Let’s get started!

Here are five low-cost index funds that provide exposure to the U.S. equity market:
1. Vanguard Total Stock Market Index Fund (VTSAX): This fund seeks to track the performance of the CRSP US Total Market Index, which includes almost all publicly traded US stocks. The expense ratio is 0.04%, making it one of the lowest-cost index funds available.
2. Schwab Total Stock Market Index Fund (SWTSX): This fund tracks the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.03%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
3. iShares Core S&P 500 ETF (IVV): This ETF tracks the performance of the S&P 500 index and has an expense ratio of 0.03%. The S&P 500 is one of the most widely recognized benchmarks for the U.S. stock market and includes 500 large-cap US stocks.
4. Fidelity Total Market Index Fund (FSKAX): This fund seeks to track the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.015%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
5. SPDR S&P 600 Small Cap ETF (SLY): This ETF tracks the performance of the S&P SmallCap 600 index and has an expense ratio of 0.15%. The S&P SmallCap 600 includes 600 small-cap US stocks and provides exposure to this segment of the U.S. equity market.
You could mix and match these ETFs and mutual funds however you please, based upon your investing goals, objectives and risk tolerance. If you only wanted to invest in one of them for example, you’re still investing in a highly diversified fund, and thus are spreading out your risk across a wide portion of the market. By dollar-cost averaging on a regular basis and investing in any combination of these funds, you can build a highly diversified portfolio that lasts for years and decades to come.

You can even get started investing today with an online discount broker if you choose. It’s a fast and easy way to get instantly diversified in the market, and many online discount brokers these days do not even charge fees or commissions for investing in the above funds!

With this in mind, below you will see some basic terms associated with options trading.

It’s important to remember that when it comes to options, there are two types we deal with when talking about the equity (stock) market – call options and put options. Also, in the stock market, each call or put option represents 100 shares.

So, for example, if you bought an Apple $145 call option, while the stock was trading at $140, you would be hoping that the stock price increases in value above the $145 level. Conversely, if you bought an Apple $135 strike put option, you would be hoping the stock price declines in value below the $135 level.

If Apple rises above $145 in the case of the call option, you could exercise the option and buy Apple at $145 and immediately sell Apple at whatever market price it is trading at, thus realizing an immediate profit.

Conversely, if you bought an Apple $135 put option while the stock was trading at $140, you would be hoping that the stock falls below $135, perhaps to $130, at which point you could immediately sell your shares at $135 and buy them back cheaper at the lower price of $130, thus profiting the $5 difference per share.

Below are some of the basic terms associated with options trading. I will give some practical examples below these definitions to try and incorporate them for a better understanding.

Call Option – a bullish strategy that gives the buyer of the call option the right to buy 100 shares of stock at an agreed upon price, known as the strike price.

Put Option – a bearish strategy that gives the buyer of the put option the right to sell 100 shares of stock at an agreed upon price, known as the strike price.

Strike Price – the price of an options contract that a stock must be above (in the case of a call option), or below (in the case of a put option), for the option to have intrinsic value to the buyer of the option. Thus, the stock must be above (for calls) or below (for puts) the strike price upon the expiration day for the option to have intrinsic value.

Expiration Day – the day the option expires, and therefore will cease to exist. Each option has an expiration day and will lose a portion of its value each day as it approaches expiration (all else held constant). This decline in value is known as theta (time) decay, and it is one component that goes into options pricing. Simply put, an option loses a portion of its value each day as it approaches expiration, because there is less chance of the option going in the money before it expires.

Index funds are a way to build exposure to the broad market for a low cost. They provide instant diversification and the ability to invest in a wide variety of assets within a single investment product.

Index funds are a way to build exposure to the broad market for a low cost. They provide instant diversification and the ability to invest in a wide variety of assets within a single investment product.

When it comes to index funds, however, not all of them are created equal. Some index funds will track different indexes and invest in assets besides just stocks, while others may have higher costs and may be more or less diversified.

That’s why I wanted to discuss five index funds today that can widely diversify your portfolio for a low cost, across the entire U.S. stock market. Let’s get started!

Here are five low-cost index funds that provide exposure to the U.S. equity market:
1. Vanguard Total Stock Market Index Fund (VTSAX): This fund seeks to track the performance of the CRSP US Total Market Index, which includes almost all publicly traded US stocks. The expense ratio is 0.04%, making it one of the lowest-cost index funds available.
2. Schwab Total Stock Market Index Fund (SWTSX): This fund tracks the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.03%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
3. iShares Core S&P 500 ETF (IVV): This ETF tracks the performance of the S&P 500 index and has an expense ratio of 0.03%. The S&P 500 is one of the most widely recognized benchmarks for the U.S. stock market and includes 500 large-cap US stocks.
4. Fidelity Total Market Index Fund (FSKAX): This fund seeks to track the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.015%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
5. SPDR S&P 600 Small Cap ETF (SLY): This ETF tracks the performance of the S&P SmallCap 600 index and has an expense ratio of 0.15%. The S&P SmallCap 600 includes 600 small-cap US stocks and provides exposure to this segment of the U.S. equity market.
You could mix and match these ETFs and mutual funds however you please, based upon your investing goals, objectives and risk tolerance. If you only wanted to invest in one of them for example, you’re still investing in a highly diversified fund, and thus are spreading out your risk across a wide portion of the market. By dollar-cost averaging on a regular basis and investing in any combination of these funds, you can build a highly diversified portfolio that lasts for years and decades to come.

You can even get started investing today with an online discount broker if you choose. It’s a fast and easy way to get instantly diversified in the market, and many online discount brokers these days do not even charge fees or commissions for investing in the above funds!

When it comes to index funds, however, not all of them are created equal. Some index funds will track different indexes and invest in assets besides just stocks, while others may have higher costs and may be more or less diversified.

That’s why I wanted to discuss five index funds today that can widely diversify your portfolio for a low cost, across the entire U.S. stock market. Let’s get started!

Here are five low-cost index funds that provide exposure to the U.S. equity market:
1. Vanguard Total Stock Market Index Fund (VTSAX): This fund seeks to track the performance of the CRSP US Total Market Index, which includes almost all publicly traded US stocks. The expense ratio is 0.04%, making it one of the lowest-cost index funds available.
2. Schwab Total Stock Market Index Fund (SWTSX): This fund tracks the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.03%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
3. iShares Core S&P 500 ETF (IVV): This ETF tracks the performance of the S&P 500 index and has an expense ratio of 0.03%. The S&P 500 is one of the most widely recognized benchmarks for the U.S. stock market and includes 500 large-cap US stocks.
4. Fidelity Total Market Index Fund (FSKAX): This fund seeks to track the performance of the Dow Jones U.S. Total Stock Market Index and has an expense ratio of 0.015%. It provides broad exposure to the U.S. stock market, including large-cap, mid-cap, and small-cap stocks.
5. SPDR S&P 600 Small Cap ETF (SLY): This ETF tracks the performance of the S&P SmallCap 600 index and has an expense ratio of 0.15%. The S&P SmallCap 600 includes 600 small-cap US stocks and provides exposure to this segment of the U.S. equity market.
You could mix and match these ETFs and mutual funds however you please, based upon your investing goals, objectives and risk tolerance. If you only wanted to invest in one of them for example, you’re still investing in a highly diversified fund, and thus are spreading out your risk across a wide portion of the market. By dollar-cost averaging on a regular basis and investing in any combination of these funds, you can build a highly diversified portfolio that lasts for years and decades to come.

You can even get started investing today with an online discount broker if you choose. It’s a fast and easy way to get instantly diversified in the market, and many online discount brokers these days do not even charge fees or commissions for investing in the above funds!
May 4, 2023
Exchange Traded Funds (ETFs) for Beginners: How to Invest in ETFs
Exchange-Traded Funds (ETFs) are innovative investment vehicles that combine the simplicity of stock trading, along with the diversified approach of mutual funds. At their core, ETFs are baskets of assets, which may include stocks, bonds, commodities, or real estate investments, that trade on stock exchanges similar to individual stocks. This unique structure allows investors to buy and sell shares of a broad portfolio of assets during regular trading hours, which means exchange traded funds offer significant flexibility, along with the accessibility that is not always available with traditional mutual funds.

Illustrative Examples of ETFs

To understand ETFs a bit better, let’s consider the Vanguard S&P 500 ETF (VOO), a good example of an index fund ETF. This fund offers investors exposure to the 500 largest U.S. companies, which essentially includes owning a tiny piece of many different sectors and industries across the U.S. economy, through a single investment. Purchasing shares of VOO is therefore similar to owning a fractional interest in all these companies, enabling you to participate in the collective performance of these firms with ease.

Another example worth noting is the SPDR Gold Trust (GLD), which focuses on gold bullion investing. By buying shares of GLD, investors indirectly invest in physical gold, with each share representing the equivalent of a 10th of an ounce of gold. This ETF therefore provides a straightforward avenue for adding gold to one’s investment portfolio, without the complexities of handling physical commodities.

Another example is the Vanguard Real Estate ETF (VNQ), which offers a different flavor by concentrating on Real Estate Investment Trusts (REITs), thereby granting investors exposure to the real estate sector through a diversified approach. This is particularly appealing for those who may be looking to include real estate in their portfolios, without dealing with the hassle (and expense) of purchasing physical property.

Advantages of ETFs

ETFs present several compelling benefits, including:
- Diversification: By holding a diversified portfolio within a single ETF, investors can reduce risk and enhance potential returns. For instance, combining stock-based ETFs like VOO with real estate-focused ones like VNQ can offer a balanced exposure to different market segments.
- Cost Efficiency: Many ETFs have very low transaction costs and/or expense ratios, which makes them an economical choice for investors. Index fund ETFs, in particular, are known for their minimal fees, as they passively track market indices without the need for active management.
- Convenience: The ease of trading ETFs—similar to stocks—allows investors to manage their investments flexibly, including the option to buy and sell shares throughout the trading day.
Considerations and Drawbacks

While ETFs are advantageous, they’re not without their drawbacks. The most notable is the expense ratio, which is a fee charged annually, and is typically based on the total assets under management. However, many ETFs, especially those tracking indices, maintain low expense ratios, making them a cost-effective option, relative to some actively managed funds, which includes mutual funds.

Investment Strategy and Goals

Before diving into ETF investing, it’s crucial to align your choices with your individual risk tolerance, investment goals, and overall strategy. Younger investors with a higher risk appetite, for example, might gravitate towards growth stocks or thematic ETFs, while those nearing retirement could prefer more stable, income-generating assets like bond ETFs or dividend stock ETFs.

Conclusion

ETFs have transformed the investment landscape, offering broad diversification, cost efficiency, and the flexibility to tailor portfolios across various asset classes. Whether you’re a seasoned investor or just starting out, understanding the nuances of ETFs can significantly contribute to a well-rounded investment strategy. As always, be sure to consider your specific investment goals, and be sure to consult with a financial advisor to tailor your investment approach to your specific needs if needed.
May 4, 2023
Top 5 Things to Consider Before Opening a Self-Directed Brokerage Account
Opening a self-directed brokerage account can be an empowering move for you as an investor. The decision enables you to take full control of your investments and can potentially yield excellent returns. However, like any significant financial decision, it’s essential to approach the process strategically. Here are the top five things you should consider before you venture into opening a self-directed brokerage account.
1. Your Financial Goals
First, you need to establish clear financial goals. Are you investing for long-term growth, or do you want a steady income stream in the short term? Are you saving for a particular goal like retirement, a child’s education, or a down payment on a house? Answering these questions can help you determine the types of investments that will suit your needs.

As you chart your financial goals, consider the timeline you have to achieve these goals. If you’re saving for retirement and you’re in your twenties, you can afford to take on more risk than someone nearing retirement. This consideration could affect the types of investments you choose.
1. Your Risk Tolerance
Everyone has a different threshold for risk, and understanding your own is critical before opening a self-directed brokerage account. Are you comfortable with potentially losing some or all of your investment in exchange for the chance of higher returns? Or do you prefer to play it safe, even if it means your returns might be lower?

Recognizing your risk tolerance helps you determine the investment products that align with your financial goals and risk appetite. If you’re a conservative investor, bonds and mutual funds may be more up your alley. On the other hand, if you’re more risk-tolerant, individual stocks, options, or even cryptocurrencies might be a better fit.
1. Your Level of Investment Knowledge
Self-directed investing requires a certain level of investment knowledge. You need to understand different asset classes, the dynamics of the financial market, and how to analyze investment options. In a self-directed brokerage account, you’re the decision-maker. While this can be exciting, it can also be risky if you’re not familiar with investing concepts and strategies.

If you’re new to investing, consider starting with basic investments and gradually moving to more complex options as you gain confidence and understanding. You could also invest in your financial education by taking investment courses or hiring a financial advisor to guide you.
1. The Cost of Investing
Cost is a significant factor to consider when opening a self-directed brokerage account. Every platform has its fee structure, including trading fees, account management fees, and potentially even fees for closing your account.

Research and compare the fees of different brokerage platforms. Are the costs worth the services and features you receive? While it can be tempting to choose the brokerage with the lowest fees, also consider the quality of their platform, their customer service, and any additional features they offer that might help you make successful investment decisions.

One important thing to keep in mind is that these days, most self-directed brokerage firms allow for minimal commissions, including $0.00 buy and sell commissions for exchange listed securities, like the New York Stock Exchange (NYSE) and NASDAQ. However, each broker will have their own specific fees and commissions unique to them.
1. The Brokerage’s Reputation and Reliability
Before you open a self-directed brokerage account, do some research on the brokerage firm. What are other customers saying about their services? Do they have a solid reputation? Are they registered with regulatory bodies like the Financial Industry Regulatory Authority (FINRA) in the U.S. or the Investment Industry Regulatory Organization of Canada (IIROC) in Canada?

Additionally, check the reliability of their trading platform. Does it have a history of crashes during critical trading periods? Is their customer service responsive and helpful when issues arise? While no brokerage can guarantee a 100% problem-free experience, you want to choose a company that provides reliable service and handles issues promptly and fairly.

In conclusion, opening a self-directed brokerage account is a big step. While it offers you the freedom to manage your investments and can lead to significant returns, it also comes with its risks. By considering your financial goals, your risk tolerance, your investment knowledge, the cost of investing, and the brokerage’s reputation, you can make a well-informed decision about opening a self-directed brokerage account.
May 4, 2023
5 Essential Considerations Before Working with a Stock Broker or Financial Advisor
Engaging the services of a stock broker or financial advisor can be a monumental step in your journey towards financial stability and success. Before you make this important decision, it’s crucial to thoroughly examine your options and make an informed selection. In this article, we will explore the five most important things to consider before working with a stock broker or financial advisor.
1. Credentials and Licensing
Before you entrust your hard-earned money to a professional, you must first verify their credentials. Make sure they are properly licensed by the relevant regulatory authorities, and that they have undergone the necessary training to guide you in your financial journey.

In the United States, for instance, financial advisors should ideally be Certified Financial Planners (CFP), which signifies they’ve passed rigorous tests administered by the CFP Board. Similarly, stock brokers must be registered with the Financial Industry Regulatory Authority (FINRA) and hold the appropriate securities licenses, depending on the services they offer.

Don’t hesitate to ask for documentation proving their licensure, and feel free to cross-check this information with the issuing authority. You’re about to place a significant portion of your future in their hands, so it’s essential that you do your due diligence.
1. Fees and Compensation Structure
Cost is a crucial factor to consider before you commence your working relationship with a financial professional. Different brokers and advisors have different compensation structures. Some may charge a flat fee for their services, others might work on a commission basis, and some might employ a blend of both.

Comprehend the pricing structure before you commit, as the charges can significantly affect your investment returns over time. Also, be aware of any potential conflicts of interest. For example, advisors who work on commission might be incentivized to recommend certain products over others. Ask your potential advisor to be transparent about their compensation structure and how it could influence their advice.
1. Investment Approach and Risk Tolerance
Your financial professional should align with your investment goals and risk tolerance. Are you aggressive in your investment strategy or are you more risk-averse, preferring a steady, long-term approach? You need a broker or advisor who understands and respects your financial goals, and is equipped to help you achieve them.

An initial meeting or consultation can provide insight into their investment philosophy. Be sure to discuss your expectations, your comfort with risk, and your long-term goals. A good broker or advisor will take the time to understand your needs and tailor their advice accordingly.
1. Experience and Track Record
While everyone must start somewhere, when it comes to your finances, experience matters. An advisor or broker with years of experience in the field can bring valuable insights to your financial planning.

Additionally, find out about their track record. While past performance doesn’t guarantee future results, a history of delivering solid advice to clients can give you some peace of mind. Be sure to ask about the experiences of past and current clients and if possible, look for reviews and testimonials.
1. Communication and Customer Service
Finally, consider the quality of communication and customer service. Are they easy to reach? Do they respond to your inquiries in a timely manner? Effective communication is key to a successful relationship with your financial professional. After all, these are complex matters that you’re dealing with, and you don’t want to be left in the dark.

Ask about their preferred mode of communication, whether it’s email, phone calls, or face-to-face meetings. Additionally, find out how often they plan to update you about your investments. You need a broker or advisor who can explain complex financial matters in a way you understand and who makes you feel comfortable asking questions.

In conclusion, choosing a financial advisor or stock broker is a significant decision that requires careful consideration. Remember, this is a person who will play a significant role in managing your financial future, so it’s important to ensure that their credentials, compensation structure, investment approach, experience, and communication style align with your needs and expectations. As you navigate this process, keep these five important considerations in mind to guide your choice and pave the way for a fruitful financial partnership.
May 4, 2023
How to Place Your First Stock Trade Online (as a Beginner Trader or Investor)

When it comes to placing your first stock or exchange traded fund (ETF) trade online once you’ve opened up a new brokerage account, it’s important that you understand all of the different parameters associated with placing trades on your brokers website, along with the different order types, special instructions on orders, GTC vs day, and so much more.

So, in this tutorial, I want to walk you through placing your first stock trade online, and hopefully make it easy for you, so that when you go to actually place the trade with your broker in real life, you will know what you’re doing!

I will be defaulting to TD Ameritrade for this just to let you know, but this will be the same / very similar template for placing your first stock trade with your broker online anyway.

With that being said, let’s get into it!

Placing the Trade

For this example we are going to use a simple buy for AAPL or Apple stock of 10 shares.

Let’s assume that you just deposited about $1500 in your account, and Apple just traded at $140 per share approximately. Since Apple was just trading at around $140 and you want to buy 10 shares, the total amount of the trade comes up to $1400. You’ll also have to factor in if your broker charges a commission for placing a trade online, but most brokers charge $0 commissions for exchange listed stocks these days anyway.

As you’ll see above from the order ticket below when I put it in on the TD Ameritrade interface, you’ll notice several boxes. Let’s go over those now.

Action

To buy or sell Apple is the question? If you want to buy Apple, you obviously hit buy, and once you’ve bought, if you want to sell, you hit sell for the action.

Quantity

The number of shares you want to purchase. For this example, you want to purchase 10 shares of Apple ($1500 deposit / $140 per share = 10 maximum shares you can buy anyway)’

Symbol

This is the ticker symbol in which the stock you’re buying trades. For Apple stock, the ticker symbol is AAPL, which in this case

Order type

This is probably the trickiest part and where most people get confused. For buy orders though, there’s two primary order types you will be using most of the time.

The first one of these order types is a market order, which is an order to buy/sell a stock at the next available price, or “at market” as some folks like to say. Market orders are an immediate execution at whatever price is available for the stock.

If Apple is trading at $140 per share for example and there are 1000 shares for sale at that price, then if we put an order in to buy AAPL stock at market, we would expect to get filled at that price approximately or around there for our 10 share trade, but market orders are never guaranteed to execute at a specific price.

A limit order on the other hand, would specify a specific price that you want to get executed at, or better. For example, say Apple is last traded at $140, but you want to try and get filled at $135 per share instead.

You could put a limit buy order in for AAPL stock at $135, and your order could even remain open for several weeks or months until Apple drops to that price if you want (known as a good til canceled order, more on that below). One the price of Apple drops to $135 or lower, your order would go through for 10 shares at that price or better (lower if it’s available at the time of your trade executing).

Time in force

Specifically in the case of a limit order, this is used to specify how long you want your order to be out there on the market for, and also the time of the trading day you would like your order to be executed at (rather regular day session, the morning session, or post market / after hours session).

To give you an example of how this works, you could for example place an order to buy AAPL stock at $135 good for the day only, which means if Apple stock doesn’t drop to $135 before the close, your order would not execute and it would expire (meaning you would have to place another trade if you wanted to try again the next day).

However, if you instead placed the trade as a GTC (good until cancelled) order, you could actually send out that order to remain on the market for several days, weeks or even months until it executes. This means you wouldn’t have to keep resubmitting the order on a daily basis if your limit price doesn’t execute. Instead, you just set one order and forget about it until it expires or it ends up getting filled!

To Summarize

Hopefully this guide helped you figure out at least the basics when it comes to stock trading and how you can place your first trade with your broker.

As mentioned above, when placing trades with your broker you will need to type in the ticker symbol of the stock or ETF you want to trade, mark the action you want to take (either buy or sell), and then put in the quantity of shares you want to buy, the price and/or type of order (limit order to specify a price, and market order to get executed immediately and right away), along with the time in force for the order (either for the day session only or good until cancelled), and also you will need to factor in any potential trading commissions that your broker might charge as well, which would be added to the cost of the trade.

Anyway, hope you guys enjoyed this tutorial on placing your very first stock trade, and let me know if you have any questions or comments below!

May 1, 2023
401(k) Investing for Beginners – How to Become a 401(k) Millionaire

Embarking on the journey of 401(k) investing can be a cornerstone for building a robust retirement savings plan. This article will discuss the process, benefits & strategies for optimizing your 401(k) investing, incorporating the latest information for the 2024 contribution limits.

Getting Started with a 401(k)

To partake in 401(k) savings plan, you’ll need to be employed by an organization that provides a 401(k) plan. Once you’re eligible, you can start allocating a portion of each paycheck towards your retirement savings. Many employers enhance this benefit with a 401(k) match program, potentially offering a dollar-for-dollar match up to a specified percentage of your contributions, which can significantly boost your retirement savings.

Understanding the 2024 Contribution Limits

For the 2024 tax year, the contribution limits for 401(k) plans have been adjusted to reflect cost-of-living increases. Individuals under the age of 50 can now contribute up to $23,500, while those aged 50 and older are eligible for an additional catch-up contribution of $7,500, which brings their total possible contribution up to $31,000.

Beyond 401(k) plans, you’re also entitled to contribute to traditional IRA or Roth IRA accounts. In 2024, the contribution limits for these accounts remain at $6,500 for individuals under 50 and $7,500 for those 50 and older, offering another avenue for tax-advantaged retirement savings.

A Real-World Scenario

Consider Joe, a 35-year-old with access to a 401(k) plan featuring a 6% company match. If Joe earns a $75,000 annual salary and opts to contribute 6% of his gross income to his 401(k), his bi-weekly contribution of $173.07 is matched by his employer, doubling his investment to $346.14 per paycheck. Annually, this equates to approximately $9,000 in contributions, before any potential investments in IRAs. Obviously this is a simplified example, but it gives you a general idea of how investing in a 401(k) plan through an employer might work.

Maximizing Your Contributions

Although the optimal scenario would probably involve maximizing both your 401(k) and IRA contributions, it’s understandable to recognize the high cost of living, and to begin making strategies to enhance your contribution capabilities. This could include budget optimization, debt reduction, & establishing an emergency fund. For instance, reallocating a typical mortgage payment towards your retirement can significantly grow your savings over time, due to the power of compounding, which we discuss next.

The Power of Compound Interest

The impact of consistent, long-term investment in your 401(k) cannot be overstated. For example, contributing the maximum amount of $23,500 annually to your 401(k), plus $6,500 to an IRA, results in yearly savings of $30,000. Over a decade, assuming a 7% average annual return, this strategy could yield over $414,000. For couples maximizing their contributions, the potential savings double, illustrating the transformative power of disciplined saving and investing.

Tailoring Strategies to Individual Needs

It’s important to tailor your 401(k) investment strategy to your financial situation, goals, and risk tolerance. Not everyone can or should aim to maximize their contributions immediately. Small increases in contributions, taking full advantage of employer matches, and diversifying your investments across different account types are good steps towards building a substantial retirement nest egg.

Conclusion

Investing in a 401(k) is an important step towards securing a financially stable retirement. By understanding the latest contribution limits, leveraging employer matches, and employing strategic financial planning, you can significantly enhance your retirement savings. Remember, the journey to retirement savings is marathon, not a sprint, and requires patience, discipline, and a proactive approach to financial management.

May 1, 2023