Why Stocks are the Best Investments Over Time

The short answer is that you should be in stocks, but only if you have 5-10 years before you need the cash. That is because it is more volatile than say bonds. But they will also give you a better return over time as well.

People who have 90% in stocks and 10% in bonds will fair better over time than those who have 60/40. That’s just historical fact. Although it can’t guarantee future outcomes, it will give you the best chances at a decent return for your retirement fund. Investing is risky. Find a professional financial advisor to help you before making any decisions.

If you take any 10 year period in the Dow Jones Industrial Average, you will make money 100% of the time.  If you invest in a broad market index fund for over 20 years, the changes are very high that you will get at least a 10% annualized return during that period.  That is even with the ups and downs of that the stock market naturally experiences during the course of time.

Times When Bonds are a Better Investment

There are at least a couple of situations where investing in bonds makes sense.  The first is if you are mega wealthy.  There are times during the business cycle where if you have a ton of money, there just aren’t enough stocks to buy out there that are good deals.

This probably means that the economy is not doing well and stocks are taking a beating.  Then it might make sense to park your money in bonds.

Another instance where investing in bonds may make sense is if you are close or at retirement age.  If you don’t have 7-10 years to wait for the stock market to run it’s down cycle, you may want to allocate it into bonds.

That is because bonds give fixex income and they are less volatile.  That is why as you get older, the proportion of bonds in your portfolio should rise.

Other Asset Classes

There are other asset classes like derivatives, money market funds and commodities.  Hwoever, generally you will want to stay away from these asset classes.  Derivatives and commodities are very risky, volatile and complex instruments.  And money market funds give way too little return overall if you want to beat the market.

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Secured cards are guaranteed by money deposited in a bank account, the amount depending on the contract. This makes creditors more likely to issue the cards to anyone who can meet this minimum requirement, even those with bad credit ratings who are usually turned away otherwise. It functions much the same way as unsecured credit cards with the payment history being monitored as well. This enables conscientious cardholders to earn high credit ratings which would enable them to apply for loans at low interest. People seeking to rebuild their damaged credit ratings often resort to this method with apparent success.

How to Pick the Best Secured Credit Card

Some might be wondering whether the unsecured type of credit card is just another way of referring to the debit card. This is not so. Although both cards are easy to obtain and come with a risk-mitigating factor, only the first has usage recording that reflects financial behavior. The frequency of this monitoring should be inquired into, with the rule of thumb being a 30-day cycle.

Additional Factors

1. Deposit protection – Whatever happens to banks, their clients should be assured of recovering a certain amount through insurance. Try to discover the exact amount and see whether the institution is insured by the FDIC.

2. Interest earnings – As the deposit will likely sit in a bank account for a while, check its interest earnings potential. It may not be much but it can be significant in the long run.

3. Qualification period – The length of time before an application for an unsecured card is approved. Most will implement a 9-month observation period before allowing a switch from secured to unsecured cards.

4. Charges – Beware of hidden fees and charges. Some of these are one-time penalties while others are recurring. Be sure to study the contract carefully, reading all fine prints to avoid surprises later on. Make payments on time to prevent excessive fees.

5. Maintaining balance – Banks will enforce a minimum balance on the deposit account. How much the card can purchase may depend on the current balance. Find out what happens if this dips below a certain level in terms of charges, credit line, and other consequences.

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Pay of your credit card balance. An outstanding credit card balance will cost you a lot of lost money on interest rates and will also adversely affect your credit score. Of all of the loans you may have, credit card card debts are the most detrimental to your financial status in the long run. Even if you can’t pay your balance off completely, increase your monthly payments.

Upgrade your home with energy efficient appliances. Renovating your home with energy-saving measures will save you hundreds of dollars on utility bills. Seal up leaks around doors and windows, insulate your attic, use duct sealant on heating and cooling systems, replace old windows, add storm windows and install a programmable thermostat to keep your temperatures practical. Combined, these measures will save you money.

Open a high yield savings account. Move your funds into a savings account that collects high interest. If you have good credit, most banks and credit unions will offer you a pretty good rate. If you don’t have enough to make your return sizable it may be time to cash out your stocks and put the money into a savings account or bond that will grow with time.

Sometimes it’s hard to know if you’re living at the edge of your income. A few good indications are unpaid credit card balances and loans. If you’re spending money you don’t have to pay for things you don’t really need, it may be time to reassess your financial situation. You may need to tweak elements of your lifestyle in order to reduce your spending, improve your credit score, and build a solid foundation for the future.

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Revamp your home to be energy efficient. Doubling down on your home infrastructure is good way to simplify your utility bills and live in harmony with the Earth. Start by making your home energy efficient: insulate your walls and attic; upgrade windows; replace your furnace and light bulbs; use solar panels and roofing. Mother Nature will thank you later, and so will your budget.

Reduce gadget expenditures. Every year, the wizards in the entertainment and tech industries release a fresh slate of new tools and gadgets but that doesn’t necessarily mean you need to acquire each and every upgrade or new toy. Most of the devices are fun but unnecessary to your bottom line. Don’t let technology trick you into thinking that an unneeded recreational purchase is actually a business expense. Also, remember to recycle old gadgets. A great weekend project is to go into your garage and make a pile of old electronic gear that can be reappropriated or recycled.

Revise your budget to exclude eating out. You never really figured that into your budget in the first place, so it won’t be difficult to take out. Unless it’s for business (in which case it can be written off, or otherwise paid for) eating out really gets out of hand. Especially when drinks are thrown in, a bite to eat can easily turn into a $100 bill. Wouldn’t that money be better invested in your kids’ college fund?  (Guilt sets in!)

These methods alone will not completely save you from an over-indulgent lifestyle. But it’s a good start. Many people who have debt problems fail to see the bigger picture, that if they live at the edge of your income they’ll never be able to balance their budgets. Taking practical steps to simplifying your life, reducing expenditures and making your home energy efficient will help you to save money and tweak your lifestyle in positive ways.

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A diversified investment portfolio allows you to spread your financial risk. Should one sector of the economy take a downturn you are protected by having money placed in other sectors. It is important to regularly monitor your asset allocation so that you may determine where your greatest risks lie and then redistribute your investments to reduce your potential loss. Below we examine those instruments that a diversified and well-balanced portfolio should consider.

Large cap stocks within the consumer goods sector. During times of economic downturns, investors can focus on quality large cap stocks that offer you good dividend earnings. These stocks have proven, over time, to be resilient during market fluctuations. Their history has proven that the company has been able to withstand declining economic conditions.

When a recession does occur two things happen: companies make fewer business investments and consumers reduce their spending. Risk-adverse investors should stay clear of industries that are cyclical in nature, such as luxury goods, real estate, technology, travel and transportation, etc. Because each of these sectors undergo a drop in consumer spending, they are particularly susceptible to a recession.

Select the stocks of those companies with a history of continuous steady cash flow that enable the firm to weather any economic downturn.   The consumer sector typically performs well during periods of recession. While these stocks may still dip in value, the slide is less precipitous than are the stocks of companies within cyclical industries. The best performing of the consumer-based stocks include food, beverage, healthcare and household goods, and cigarettes. The reason these stocks do so well even during recessions is that these purchases represent necessities rather than impulse or luxury buying. These are the products that are typically the last to be removed from most consumers’s shopping lists.

In addition to being recession-proof, most large cap consumer-based stocks also pay an attractive dividend.  Such examples include the CocaCola Company, Proctor and Gamble, Merck, General Foods, Walmart, along with most major health insurance companies. Each firm has done fairly well even during the toughest economic cycles. Although mergers and acquisitions have affected the pharmaceutical industry in the late 20^th and early 21^st century, an index consisting of the largest pharmas would still have performed much better than more diversified indices.

1. Fixed Income (FI) Investments and short-term bonds. During recessionary periods, many investors become risk-averse and sell their high-risk investments and move into safer securities such FI investments and government-backed short-term bonds. Although corporate-backed bonds and mortgage-based securities offer higher yields, they also have higher default rates than government-issued investments. Other short-terms FIs such as certificates of deposit and U.S. Treasury notes also provide a good measure of safety during recessionary periods.
   
2. Cash is king! No doubt that cash is kind during economic downturns. When all other investments decline, cash retains its value. Although there is the risk of inflation which means you may mean you have to pay more for products and services, cash remains the safest vehicle for savings during a recession.

An added advantage to having cash is that when the recession lifts, you may use your cash savings to purchase attractive stocks when prices are low rather than using a margin account which will need to be paid back and eat into your profit. When economic times improve you may again redistribute your portfolio and introduce a bit more risk to the pie.

This was a guest post by Daniela Baker. She is a social media advocate at CreditDonkey, a credit card deals website.  Daniela covers small business credit card deals and social media.  She says, while very few investors survive a recession without at least some loss, you can reduce your risk by managing your portfolio wisely through the vehicle of diversification.

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So, let’s talk about financial stress in general. I came from a family that manages money pretty well, and some of the family members stressed more than others over it. Somehow we think that worrying and stressing over our money will help us in the long run. Can it make you hoard and save up all of your money to prevent financial losses and heartache? Most certainly it can prevent that, I’ve heard of many cases of people intensely worrying about their money, and retaining their cash stash.

However it’s not necessary to worry about your finances and manage your money well. Doesn’t happiness with money sounds better than money with unhappiness and worry? It does to me.

So how do we achieve great money management without worry?

1) Realize that your fears are just that, fears. You can still have CONCERN about a future outcome without worrying about it. Focusing on the bad, is actually more likely to make the bad happen. Or avoidance of the bad, will make you hoard all of your money so you can’t enjoy spending it ever.

2) Upgrade your money management skills. Taking an online course, or hiring a financial adviser, or your accountant to teach you budgeting and money management skills always helps.

3) Get a system in place. I used to scoff at having systems for doing things, but once you get a good financial system in place to track spending, dole out spending money, watch investments, etc – things are a lot easier in managing money (and thus your worry). Putting time into designing a system THAT WORKS FOR YOU (not someone else) – is worth it. Once the system is in place, you don’t have to think about it, just follow it and check-in.

4) Save the best, discard the rest. I’m with Ramit Sethi, author of “I Will Teach You To Be Rich” on this one, spending on what’s important to you and cutting back on frivolous spending i.e. things that aren’t important. If you wardrobe is important to you, then don’t skimp on it, but maybe you really could care less about eating out so much, so you cut that

So in a nutshell, if you can be emotionally neutral about your financial decisions, or when a financial mishap comes your way, not only will you be more able to handle it, you’ll have better life and financial well-being overall.  Sounds like a good combination for success and happiness to me, I’m not really for one without the other.

As always, leave comments, questions and thoughts below.

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When it comes to setting up your own business venture, there is one factor that you will need to pay special attention to above all others; that of your finances. Having your own business requires a large amount of capital to cover your operational expenses as well as payments for building lease, office equipment, manpower, and your personal expenses at home. As you will be investing your own money and credit towards your new business, it is imperative that you answer these five financial questions to help you assess whether you are financially liquid enough to stand on your own.

1. Do I have enough money saved to cover my expenses? One of the foremost questions you will need to ask yourself is whether you have enough money in the bank to cover both your business and personal needs. As you probably won’t be earning much during the first few months of your business, you will need to make sure that your savings can cover your needs for a good 6-12 months. Knowing how much you have also helps you control and prioritize your expenses.

2. How much debt can I take on? For many budding entrepreneurs, acquiring a financial loan is a necessity to help fuel their new business and give it a better profit margin. As such, business debt can do your new company much good, provided that you know how much debt you can take on. Always keep in mind, that although it is a business loan, it is still your name on the line and should your business fail, you will still be required to pay off your loan.

3. What options do I have for health insurance coverage? One consideration you would also need to take into account is that of your health insurance coverage. If you are presently employed by a company that is subjected to the Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations, you can still have the option to keep your current coverage by personally paying for it while you scour the health insurance market for a more affordable option.

4. Do I have enough lines of credit to work with? While still contemplating whether you are truly prepared enough to set up a business of your own, you can also take the time to look at your home equity line of credit as this can provide you with the means to get a loan at a much friendlier interest rate then credit cards provide.

5. Do I have enough disability coverage? Resigning from your current post can mean the loss of your disability insurance which is essential if you intend to set up your own business. To give yourself enough protection, you will need to pay for your own disability insurance policy to prepare for any eventuality.

If you take the time to calculate these expenses as you develop your business plan, you are setting yourself up for a better chance of success. Know-how and effort are not what put a stop to most new businesses. It is almost always the finances that keep a new venture from being successful. Be smart, plan ahead, and enjoy the incredible difference of successfully becoming your own boss.

For those who are looking to start their own business, the trucking industry can be a great way to become your own boss. At TruckertoTrucker.com, we help connect new entrepreneurs with new and used daycab trucks at a great price. Whether you are searching for used Texas trucks or new California semis, we can help you make the step to business owner when you are ready.

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Certain states can actually make retiring even harder. These states have notoriously high income taxes – some even allow cities within the state to add on additional taxes – which can quickly dwindle resources. If you have found yourself considering retirement in one of the following states, you may want to rethink your options.

Vermont

Coming in as possibly the most unfriendly state in regards to taxes for retirees is Vermont. The state may have great cheese, maple syrup, and stellar ski slops, but it also has high income tax and estate taxes. Not to mention, that out-of-state pensions are fully taxable, and that the cost of living is one of the highest in the nation as well.

Minnesota

Most retirees want to avoid long, cold winters, but for those planning on retiring on one of the many lakes Minnesota has to offer, be prepared for high taxes alongside high snowfall. The state income tax is high – and can be almost 2.65% higher depending on the county in which you live. In addition, pensions are highly taxable, and social security is taxed on your federal return.

Flickr photo by Marxchivist

Nebraska

Nebraska may seem like a bland state, but that doesn’t mean that people aren’t retiring there. Folks who plan on retiring in Nebraska to hand down the family farm, may want to reconsider. The state income tax can reach as high as 6.84 percent, social security has no tax breaks, and there is a high inheritance tax.

Oregon

Oregon boasts the second highest state income tax, next to Hawaii, at 11 percent, and the only tax break offered is that of social securities. Otherwise, everything is taxable, and the inheritance tax is so severe that even intangible personal property, such as investments, can’t hide.

California

Most areas of California might have the ideal weather that retirees seek, but the state unfortunately has some of the worst taxes. Coming in at a close third, California’s state income tax is a whopping 9.55 percent, and all forms of social security income, with the exception of social security, are taxable.

If you believe that you have run out of options for good places to retire, never fear. There are a few states that are actually easy on retirees including Wyoming, Mississippi, Pennsylvania, Kentucky, Georgia, and Oklahoma. Planning for retirement may not always be easy, but finding a great state in which to retire can often make the process easier.

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#1. Look at it as a sale

When your favorite store has a massive sale, do you get angry or upset about it? Of course you don’t! In fact, you’re probably ecstatic over the savings. Why not think of the stock market the same way?

A successful Wall Street veteran once told me “Buy when others are cryin’ and you’ll do just fine boy.” Warren Buffett has said “Be fearful when others are greedy, and greedy when others are fearful.” Of course they’re not implying one should go out and gamble on highly speculative companies, but rather to consider those strong companies – the cash cows that are making money hand over fist – when they trade at significant discount. In short, think of times like these as a possible opportunity when it comes to your investments.

#2. Stay busy

One of the best ways to take your mind off something (whatever it may be) is to just stay busy and distract yourself. However I should probably clarify that distracting yourself doesn’t mean jetting over to Bloomingdales and charging up the credit card. Nor does it mean dashing off to the Ritz-Carlton hotel for spa treatments. What I’m recommending you do is to stay busy with productive things. Need ideas? Here are three:

(a) Get entrenched in a good book

(b) Learn that hobby/craft/sport you’ve always wanted to try but never did

(c) Exercise not only helps ease tension, but also can boost your confidence by helping you look good and feel healthy

Flickr photo by rednuht

#3. Seek the comfort of others

Let’s face it… we’re all in this mess together. Even though it doesn’t actually solve your financial problems, a lot of times just socializing with others in the same boat will help you feel more at ease. Right now could be a great time (and excuse) to reach out to friends and family that you’ve been meaning to catch up with to see how they’re doing. Chances are, many of them feel the exact same way you do!

#4. Put things in perspective

It’s easy for us to get annoyed when someone makes a statement like “remember you’re lucky to have food on your plate” or something along those lines, but how about this time you actually ponder that more deeply. Take a moment to watch some videos like this and I think you will feel better about your personal situation, regardless of how bad it may be right now. Growing up, I had a wise neighbor that said “whenever you have it bad, just look to the left and look to the right and chances are, someone has it worse.” This holds true for just about all adversities whether its job loss, health issues, credit card debt, family problems, death of a loved one, and the list goes on.

Closing thoughts?

There’s no denying that times are tough right now and in turn, the future can seem bleak. I can’t tell you what tomorrow will bring, but I can tell you that going insane and freaking out certainly won’t make it any better. So consider these tips to stay calm during times like these.

This post was written by Mike, the creator of Credit Card Forum. His most recent post was a review of the Ritz Carlton rewards card but given its very high $395 annual fee, you would be much better off to check out these reward credit card offers instead.

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The benefits of a college degree are very real, but so are the high costs of obtaining one. Someone who seeks a 4-year traditional degree is going to be hard-pressed to find a school that doesn’t cost a good amount of money. Even if you save well and space out the payments, there’s a good chance you’ll feel tempted to turn to ExpertBail bail bonds as the costs rise to create for you a personal financial prison.

Of course, for those people who struggle mightily to cover the cost of college, there’s a good chance that they qualify for financial aid. But not all financial aid is created alike. There’s a wide range: you could get a full ride or just a couple hundred dollars in loans.

While the amount of aid you receive is largely based on uncontrollable components of your specific situation, there are a few steps you can take to maximize, as best as possible, the money you get.

Claim Dependents

The dependents you claim on federal and state tax filings can have a substantial impact on the aid you receive. Four dependents, for example, will likely translate into more aid than 0 or 1. So if there are any people in your life who are financially dependent on you, list them. Furthermore, if you’re just graduating high school and have been a dependent of your parents all your life, now is probably a good time to file as an independent.

Go In-State

Many people choose public schools within their state of residency because those schools are usually cheaper in the first place. But the in-state savings also apply to aid. At many colleges, larger amounts of need-based aid are set aside for in-state students. If you’ve already found an appealing, cost-effective school that is not in your state, it may be worthwhile to figure out the steps you need to take to establish residency there.

Communicate

Most schools have dedicated financial aid departments that are dedicated to doling out scholarships and working with the student to reduce his costs. These financial aid people want to help you, and appealing to them often brings about immediate results. With this in mind, go into the office and explain your circumstances in detail. They may not be able to give you more money, but doing so certainly can’t hurt.

It is hard to over-emphasize the importance of a college degree these days. As a result, you want to insure that nothing gets in the way of your path to that degree – money included. By following these tips, you’ll hopefully be able to secure a bit more aid and a bit more peace of mind.

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