What Should You Do With $5000

If you suddenly received a windfall of $5000 or so or happened to reach that amount in your savings, what would you do with that money? Actually, a better question is what should you do with that money? Most of us could blow $5000 on things we want quite easily. However, that’s not really what we should do.

The first thing to do is to take care of any outstanding debt. If you don’t have much debt or if there’s still some money left over, your next step should be to invest the money you’ve saved. That might be difficult when there are so many things you want right now, but investing will pay off in the future and for the long-term, making it a much smarter option than just going on a spending spree.  

There are all kinds of different investment options at your disposal. You could put the money into a mutual fund, an index fund, a certificate of deposit, or an exchange-traded fund. Which one you should choose is dependent upon a lot of different factors.

One of the first things to consider when choosing an investment avenue is how soon you’d like to see a return on your investment. Those who’d like to see a nice pay-off in five years, for example, are obviously going to want a different option than those who can wait ten or more years.

If you don’t want to wait at all or to only wait as long as you can with no restrictions, an online savings account may be your best option. With this option, you can take out your money at any time. Obviously, it will accumulate more and earn more interest the longer you leave it in, but it’s there if you need it with no withdrawal penalty. Also, you’ll typically get a better interest rate than you would with a savings account at a traditional bank.

For those who are aiming for an investment return in five or fewer years, a CD is a good option. You can choose a maturity date for your CD, so you can set it up for five years or whatever other time you want. Do be mindful when you set up your maturity date, however, because if you withdraw any money before then, you’ll pay a hefty penalty.

If the idea of a penalty scares you, then you might consider a money market account. These accounts are similar to CDs though they do earn less interest. CDs, and most other accounts that allow you to withdraw money at any time, typically do earn less interest. However, they make up for the lowered interest rate by having no penalty for withdrawals no matter when you withdraw the money. Of course, the longer you wait, the better, but that’s true for most types of investment accounts.

For those who want to guarantee higher interest rates and who don’t mind waiting several years (generally more than five) to see a sizable return on their investment, actively managed mutual funds are a good choice. With these funds, you’ll have access to a wide range of stocks. Plus, if you hire a fund manager to assist you, you won’t have to make those tough decisions about which stocks are the smartest to invest in at which times. 

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Easy Investment Ideas

A lot of people think that investing is only for the super-rich and/or the super-skilled.

The truth is, however, that absolutely anyone can be an investor. You don’t have to have a ton of know-how or even a ton of time to be a smart investor.

If you’re looking for easy, no-hassle ways to invest, rest assured that we’ve got you covered!

Automatically Advised Profiles

One option, to start with, for the laid-back investor, is to go for an automatically-advised investment profile. All that these profiles require you to do is to simply sign up. The rest will be taken care of for you through an automatic system.

When you sign up for one of these services, you simply select your cap (how much you have/want to spend) and provide general information about your finances, interests, and goals.

Based on this information, your auto-investor will diversify your funds among any and/or all of the following, depending on your preferences:

l  U.S. Stocks

l  International stocks

l  Emerging market stocks

l  U.S. Corporate bonds

l  International bonds

l  More!

Just remember that, while an auto-investor might be useful for managing your money later in the process, it’s wise to consult a real-life financial advisor to help you make the right choices during setup.

Retirement Advisors

Another option you have is to choose a “real-life” or online retirement account advisor.

These professionals, many of which work on a non-commission basis, can help you with rebalancing, tax-loss harvesting, and more- all designed to help you make the most of your retirement accounts and perhaps even to make some smart, retirement-related investments.

While the choice is yours, most people do prefer to work with a real, live person when it comes to retirement matters since so much is at stake, and it’s nice to have someone who can help walk you through your options for an awesome future.

Blue Chip Stocks

Finally, don’t forget that you can always go with so-called “blue chip” stocks. These are simply “safe” stocks, i.e. Stocks that come from very well-established, well-known, stable, and reliable companies, such as Coca Cola, Starbucks, or McDonald’s.

  

In other words, these are stocks that, barring very unlikely events, are going to fare relatively well the vast majority of the time.

These safe-bet stocks can help you to gain multiple individual shares of stocks, and while you might not have the most diverse or impressive or even unique profile on the block, you’re also not facing a lot of risk, worry, or necessary hands-on changes and management

As you can see, there are all kinds of investment options in today’s world. If you’re not someone who wants to devote a lot of time and energy to investing, know that, with the right help and the right choices, investing- and benefiting from your investments- is still a real possibility for you.

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Unique Investment Options

Are you looking for something worthwhile to do with your money? Chances are that you get all kinds of offers and pitches each day, but don’t listen to all of that. Think about what you really want to do with your money, and choose something that you’re passionate about and that will be beneficial for you not just now, but in the long run as well. For options that do all of these things and that are also fun and unique, consider the following ideas.

Invest In…Yourself!

As a person, you have earning potential. The good news is that your earning potential can always go up, especially if you invest in yourself. By making choices that are going to make you more employable and that are going to earn you higher pay, you can make a big difference in your life. There are many ways to invest in yourself, depending on what you do and what your goals are, but here are some ideas that could work:

·         Get an advanced degree
·         Get a career certification of some kind
·         Attend trainings, seminars, conferences, or classes that will improve your skills and abilities
·         Hire a career coach, a personal assistant, a financial advisor, or other professionals who can help you to improve yourself

Be a Silent Partner

In addition to investing in yourself- which you should do regardless of what other investment avenues you choose- you may want to consider investing in a business you believe in. While you definitely

have the option of starting your own business, you can avoid the risks and stresses that go along with that and still get all of the benefits by choosing to become a silent partner for someone else’s business.

You can provide investment capital to the business as a silent partner, which will give you percentage ownership of the business and its income. So, you’ll make money as the business does, and, in the event that the business is ever sold, you’ll enjoy an equity payoff. Just make sure to choose a business that has real potential and that you could see sticking around for a few years at least.

Invest in…Hedge Funds

Finally, consider investing in hedge funds. While these funds once had a bad reputation for having high buy-in rates, things have changed in recent years. Now, more and more accredited investors are offering them as an alternative investment, and as such, they’re getting a lot more popular, accessible, and reliable. While hedge funds can pay off big, they can also be a big disappointment if you choose the wrong one, so have a finance professional help you select and invest in a good hedge fund.

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11 Year Old Children Win Investing Contest

In case you haven’t heard, Motif is a company that has recently started offering a thematic investment platform to the general public for its use. Since the platform was created a little over a year ago, more than 75,000 people have created their own “motifs” with it.

The motifs act as no-fee ETFs and can be formed around all different kinds of ideas. With so many people contributing and creating their own motifs, more and more are coming on the scene so that motifs have become even more prevalent than both ETFs and mutual funds.

With so many motifs available, all kinds of people- people who didn’t know the first thing about investing before- are now getting into the investment game. Perhaps one of the most interesting success stories involving unlikely investors is the tale of eleven year old children from Fargo, North Dakota who participated in and won an investing competition sponsored by Motif itself. These children beat out ivy league MBA students and a host of other, more seasoned investors. Their idea, created as part of a 9^th grade math class project, beat out all the others. Their plan was to bet on very well known companies, such as Facebook and Netflix.

Their success proves that everyone is an expert at something. These young students, it seems, had their pulse on the finger of what was “hot” and succesful at the moment, and they used that knowledge to their great advantage. Their story should prove to anyone and everyone that investing is possible. All you have to do is utilize a great tool, such as Motif, and use what you know. A little help from an investment advisor or other professional can also help, but as these children proved, it’s not always necessary.

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The Importance of Paying Attention to Annual Reports

It makes sense that, before you invest in anything, you should read the fine print and know exactly what you’re getting yourself into. When it comes to most major investments, that “fine print” comes in the form of annual reports. Unfortunately, however, a lot of investors readily admit to not reading those reports. Even though that’s not a good practice, it is an understandable one. Annual reports are tough to get through, tpically being densely worded and full of financial jargon. So, what’s a smart investor to do? Well, you could, instead of forcing yourself to read the whole thing, at least commit yourself to reading through the most important parts.  

The Executive Summary

One of the most important parts of an annual report can usually be found right at the beginning. It’s known as the executive summary and is basically a “talk” from the CEO explaining the latest happenings and changes within the company. If the CEO seems happy and has clear goals and predictions for the future, things are looking good. If the note doesn’t really say much, is negative, or seems to “beat around the bush” about the future, watch out!

Money Matters

Not all of the important information in an annual report is delivered through words. In fact, the numbers, not the words, often tell the real story about how a company, and thus your investment in it, is faring. Look to see if debt levels have increased and if sales are going down. If you notice any of these issues without a reasonable explanation, it may be time to look to other investments.

Proxy Voting

Almost every annual report will include a space where you can cast your “proxy vote.” Casting that vote is part of your duty as a shareholder, and if you don’t do it, you could be deemed “inactive.” Fill out your vote, and if you don’t understand the jargon or what you’re doing, talk to your investment advisor.

Ideally, we’d all sit down and read through and understand every word of our annual reports. However, that isn’t always possible. If you can’t do that, at least pay attention to these important areas of your annual reports for maximum benefits and safety.

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How to Spend Smart while You're Young

When you’re young, you often feel like the world is your oyster and that, though your actions may have consequences, those consequences won’t come until much later. In truth, though, those consequences tend to come around more quickly than you might think- especially when it comes to your finances. Plus, chances are that in your youth, you’re not earning as much as an older adult, a fact that makes irresponsible spending all the more...well...irresponsible. To get your financial life started off on the right foot, you need to start making smart financial choices now. The good news is that making those choices is easier than you might think. It’s all about making small steps in the right direction and doing so consistently. 

Open a 401(k) and Handle it Responsibly

While it’s tempting to physically take (and probably spend) as much of your regular paycheck as possible, that’s really not a smart strategy. As young as you may be and as far away as the future and things like retirement may seem, they will be here sooner than you think, and that means you need to be preparing for them. One of the best and easiest ways to do that is by opening a 401(k). This strategy is even smarter if your employer is willing to match your contributions. Take advantage of that match if it’s available, but don’t feel like you need to contribute to your 401(k) to the max. You still need enough money to survive and even to have a little fun.

Don’t Buy Things You Don’t Need

This one should go without saying, but avoid those frivolous purchases, even if you don’t think they’re costing you much. Sure, that novelty bracelet or that cool vintage t-shirt may only be $5, but if you think that way, those small purchases can easily add up into big debt. This isn’t to say that you can’t splurge from time to time, but keep it in check. One small treat per pay day, after your bills are paid and you’ve stashed some money in savings, is more than enough.

Use Credit Cards Responsibly

Many young people are afraid of credit cards and the debt that often goes along with them. However, don’t be afraid to get a card if you can. As long as you use it responsibly- making small purchases and paying them off as you go- you should be just fine. In fact, you should be better than fine because you’ll be building your credit. If you’ve already made credit card mistakes, however, focus on paying off those balances and avoiding late fees. Once you’re back in the clear, you’ll have a fresh start to do things right with your credit card.

As you can see, there are a lot of ways to take control of your finances, even at your age! Start taking these wise steps now, and you’ll see big pay-off, literally, in the future. 

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Warren Buffet Tells You how to Turn $40 into $10 Million

Warren Buffett is perhaps the greatest investor of all time, and he has a simple solution that could help an individual turn $40 into $10 million.

A few years ago, Berkshire Hathaway CEO and Chairman Warren Buffett spoke about one of his favorite companies, Coca-Cola, and how after dividends, stock splits, and patient reinvestment, someone who bought just $40 worth of the company's stock when it went public in 1919 would now have more than $5 million.

Yet in April 2012, when the board of directors proposed a stock split of the beloved soft-drink manufacturer, that figure was updated and the company noted that original $40 would now be worth $9.8 million. A little back-of-the-envelope math of the total return of Coke since May 2012 would mean that $9.8 million is now worth about $10.8 million.

The power of patience

I know that $40 in 1919 is very different from $40 today. However, even after factoring for inflation, it turns out to be $540 in today's money. Put differently, would you rather have an Xbox One, or almost $11 million?

But the thing is, it isn't even as though an investment in Coca-Cola was a no-brainer at that point, or in the near century since then. Sugar prices were rising. World War I had just ended a year prior. The Great Depression happened a few years later. World War II resulted in sugar rationing. And there have been countless other things over the past 100 years that would cause someone to question whether their money should be in stocks, much less one of a consumer-goods company like Coca-Cola.

The dangers of timing

Yet as Buffett has noted continually, it's terribly dangerous to attempt to time the market:

"With a wonderful business, you can figure out what will happen; you can't figure out when it will happen. You don't want to focus on when, you want to focus on what. If you're right about what, you don't have to worry about when"

So often investors are told they must attempt to time the market, and begin investing when the market is on the rise, and sell when the market is falling.

This type of technical analysis of watching stock movements and buying based on how the prices fluctuate over 200-day moving averages or other seemingly arbitrary fluctuations often receives a lot of media attention, but it has been proved to simply be no better than random chance.

Investing for the long term

Individuals need to see that investing is not like placing a wager on the 49ers to cover the spread against the Cowboys, but instead it's buying a tangible piece of a business.

It is absolutely important to understand the relative price you are paying for that business, but what isn't important is attempting to understand whether you're buying in at the "right time," as that is so often just an arbitrary imagination.

In Buffett's own words, "if you're right about the business, you'll make a lot of money," so don't bother about attempting to buy stocks based on how their stock charts have looked over the past 200 days. Instead always remember that "it's far better to buy a wonderful company at a fair price."

To your wealth,

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Wise Ways to Use a Windfall

Most of us dream about money just, one day, falling into our laps. And, while for most people, the dream remains just that- a dream, it does sometimes happen to the lucky few among us. If you happen to get a nice little windfall of cash, whether it be $1000 or $10,000, why not do something smart with it, something that can turn that little windfall into a potentially permanent cash flow!

Take Advantage of Company Match Policies

Employers, in an effort to encourage their employees to save for retirement, will often agree to match investments made into retirement funds. If your employer offers this option, you could, quite literally, double your money. Sure, you might not see the money until much later in life, but it’s money you weren’t expecting to have anyway, so why not?

Invest in the Stock Market   

Even if you’re not someone who regularly plays the stock market, you have nothing to lose by investing your “free money” into it. Don’t just make an investment choice at random however. If you don’t know much about the market, request the help of a financial advisor. For a small fee, they can typically give you a rundown on which stocks are the best bet right now, enabling you to make the most informed decision possible about what to do with your money.

Pay Toward a Stubborn Debt

Do you, like so many other people, have that one bill that never seems to get paid? Maybe it’s the credit card bill that has to take last priority over the other expenses in your life, or maybe it’s that old student loan debt. Whatever the case may be, if you have some stubborn debt in your life that never seems to get paid, a little unexpected cash is the perfect thing to put toward it. If you’re lucky, you might even be able to pay it off completely!

As such, there are a lot of truly great things you can do with unexpected money. Instead of wasting it all on a shopping spree or a quick vacation, do something lasting and positive with that money. You’ll thank yourself big time later.

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Crowdfunding: Whats it All About?

Are you looking to jump on the “crowdfunding” bandwagon? This trendy method of investing in start-up companies gained momentum after federal legislation was enacted a few years ago, but the basic idea has actually been around for centuries. 

As the name implies, crowdfunding is the practice of pooling small investments from a large group of people to fund a start-up company. This runs counter to the usual method used for initial public offerings (IPOs) where shares of stock are initially sold to the public on a securities exchange. Although IPOs have several advantages, the process is often costly and time-consuming, not to mention the hassles associated with meeting disclosure requirements and other technical rules. In contrast, crowdfunding now offers a simpler solution. 

Prior to 2012, crowdfunding wasn’t as popular because a company had to meet the stringent reporting requirements if the number of shareholders exceeded 500. However, the Jumpstart Our Business Start-ups Act of 2012 (the JOBS Act) increased the limit to 2,000 shareholders. Thanks to the JOBS Act, the age-old premise of crowdfunding has renewed life. 

Virtually every small business – even those that are unincorporated – may use this technique to raise capital. Crowdfunding typically takes place over the Internet through “funding portals.” Some of the most popular websites promoting crowdfunding are Kickstarter, CircleUp, and Fundable. Do your due diligence before making any commitments. Of course, crowdfunding is not without drawbacks. For instance, it could lead to fraudulent activity, shares are illiquid so there’s little opportunity for resale, and investors may be kept in the dark about significant events.

Whether you’re considering an investment or trying to raise funds for your firm, proceed with caution.

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