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Training Your Financial Garden to Bloom

The Money Nerve
Investing in a Bull Market

Training Your Financial Garden to Bloom

We often speak about putting your dollars to work or controlling your money to avoid bad fiscal habits controlling your actions or pinching your Money Nerve, but today I would like to discuss training your financial garden to bloom. When you plant a garden, you want to nourish the seeds, water the plants, pull out the weeds and give it some of your attention every day. Let’s apply that same concept to your garden of dollars to enrich what you have by growing your finances with a definite plan, proactive actions, and being mindful about money every day.

 

Bull Market Jitters

With the stock market at an all-time high, during this nine-year run of the Bull Market, many people are now wondering and worrying about the best time to harvest their returns. Do you cash out of the stock market now and funnel the cash into tangible assets like real estate or gold (up 2% in the last two weeks)? Or do you ride the Wall Street Wave for as long as you can and hope your losses will be offset by the past five years of high returns. Don’t let emotions rule your decisions. We all know that day of reckoning is coming, but we just don’t know when it will happen. Continue to grow and train your financial garden, keeping up with the positive trends and weeding out the bad investments.

Rebalancing Stocks

Rebalancing is essential any time you invest but even more so when the market is peaking. You should be reviewing your assets on a regular basis and tweaking as the need to reduce risk or increase it changes over time. The habit of rebalancing also helps to keep any emotional, knee-jerk reactions to the market’s volatility under control. Be sure to ask yourself what comparative advantages/products/services made you buy a stock in the first place, and decide if that same mindset holds true today. Additionally, having 30-40% of your assets in cash can help insulate your portfolio from stock price declines. Although you won’t generate the higher returns, you have given yourself liquidity and a degree of safety.

Five Investment Strategies for a Bull Market 

(Via USA Today, photo credit: Getty Images)

1. Reassess your investment thesis for each holding

Dividend stocks come with some key advantages.  The main reason many people like dividend stocks is that dividends paid are a beacon for income-seeking investors looking for time-tested business models. In other words, a company isn’t going to pay a regular dividend if its management team doesn’t expect profits to continue.

2. Add dividend stocks to hedge against inevitable stock market corrections

In an environment where the Fed is walking on eggshells and only incrementally increasing rates, growth stocks should continue to have access to relatively cheap capital that they can use to expand and hire.

3. Consider focusing on growth stocks in a low-interest environment

Buying into high-quality stocks on a regular basis helps to remove emotions from the equation, and it eliminates trying to “time the market.”

4. Regularly buy into stocks to lower your cost basis

Another great idea, now that the stock market at an all-time high, is to buy into new and existing stocks on a regular basis. Whether that’s weekly, monthly, or quarterly, buy into companies that you believe in regardless of where the three major U.S. indexes are valued.

5. Trust the process (and the data)

Last, but not least, trust the process and the long-term data. As noted, the stock market has returned an average of 7% annually, inclusive of dividend reinvestment. This percentage would work out to a doubling an average of once a decade.

Spending time thinking and planning to train your financial garden to grow in a bull market will reap benefits when market corrects itself.

 

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The A B C’s of Setting Up Your 401(k)

 the money nerve

The ABC’s of Setting Up Your 401(k)

What is a 401(k)?

Essentially, a 401(k) is a retirement savings plan sponsored by an employer. This plan allows workers to select whether they want a larger paycheck now or to defer some of their money by saving and investing a portion of revenue from their paycheck before taxes are taken out. Different from pension plans where companies managed employees assets, 401 (k)s give workers more autonomy to manage their retirement funds.

Matching Funds, Take It! It’s Free Money.

Many companies also match contributions, often with a 3% or 6% cap. With this type of 401(k) account, taxes are paid when a person begins to withdraw money. If you put in 3% of your $50,000 salary, or $1,500, your company puts another $1,500 in the pot. You can add more than that $1,500 yourself, but the company won’t match beyond 3%.

What is the best type of 401 (k) to open?

Choosing whether to use a Roth 401(k) or a Traditional 401(k) is often determined by age and by salary level. If you are in a higher tax bracket, you may prefer lowering your salary by investing now and paying taxes later, thus the traditional approach may work best. For many people already in a lower tax bracket, it may make more sense to open a Roth 401(k) where you pay the taxes now. This plan also offers some qualified tax-free withdrawals. Just be sure to select a beneficiary or the person who gets your money if you die when you set up your 401(k). And, find out the percentage of fees for your account. You want to keep that below 1 % for maximum savings power.

How Much Can I Invest?

For 2017, the maximum amount of compensation that an employee can defer to a 401(k) plan is $18,000. Employees aged 50 by the end of the year and older can also make additional catch-up contributions of up to $6,000 for a total of $24,000. The maximum allowable employer/employee joint contribution limit remains at $53,000 for 2016 and $54,000 for 2017 (or $59,000 for those aged 50 and older). The employer component includes matching contributions, non-elective contributions, and profit-sharing contributions. Via Investopedia

401(k) resources

This 401(k) calculator can help you figure out how much you should be saving
The 401(k) fee analyzer can show you how the investment fees in your plan stack up to others
The NerdWallet IRA vs. 401(k) guide can help you maximize your retirement savings dollars in both types of accounts at once

Make it Easy to Save
Make your 401(k) contributions automatically. You can even set up your plan to raise your level of saving each year. The more automated your financial plan is – the more likely you are to have a substantial nest egg when you get ready to retire! Check out this list of investing and saving hacks.

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Investing In a Volatile Market

Guest Blogger George Diaz

Investing In a Volatile Market

Ever since the election of Donald Trump, markets have been very volatile, hitting record highs one minute, and then experiencing massive selloffs the next. For this reason, it is imperative to know “how and where” when investing in a volatile market.

We are living in turbulent times.

Market volatility should be a reminder to regularly review your investments and make sure you have a diversified investment strategy that matches the overall risk in your portfolio to your personality and goals. Here are some guidelines for you to invest in an unpredictable market.

1. Stand firm: Crises happen on a regular basis and are usually of short duration.

Market crashes can be annoying, but history shows that the stock market has been able to recover from declines and can still offer investors a positive return in the long run.

In fact, in the last 35 years, the market has experienced an average decrease of 14% from highest to lowest during each year, but still had a positive annual return more than 80% of the time.

2. Be at ease with your investments

If you are nervous when the market goes down, you may not have the right investments. Your time horizon, goals and risk tolerance are key factors in ensuring that you have an investment strategy that works for you. Even if your time horizon is long enough to justify an aggressive portfolio, you have to be comfortable with the bumps you will encounter.

However, you should be mindful of not being too conservative, especially if you have a long-term horizon because strategies that are more conservative can not provide the growth potential you need to achieve your goals.

 

Attempting to enter and exit the market can be costly.

3. Do not try to time the market

4. Invest regularly despite volatility

If you invest regularly for months, years and decades, short-term crises will not have a big impact on your bottom line. Instead of trying to judge when to buy and sell based on market conditions, if you take a disciplined approach to investing, you avoid the dangers of market timing. Seize opportunities!

Bear Market Strategies

During a general downturn in financial markets as a result of economic uncertainty, investors rush and seek security in their investments.

There may be some actions to take while the markets are down, to help you have a better position for the long term. These strategies are complex, and you may want to consult a professional before making any investment or tax decisions.

1. Avoid positioning yourself in volatile funds or ETFs of complex nature, even more so during a full correction.

2. Say goodbye to the losers. Now is the right time to do a portfolio cleaning. If these stocks did not perform well in boom times, why would it be any different now?

3. Reduce your stock positions. If the market continues to decline, you will be able to go hunting for undervalued securities, because you will have sufficient liquidity.

4. Buy bonds. Debt securities can be great allies in the midst of bearish gaps in the market.

5. If the stock market continues to move down, try to avoid constant monitoring, as fear will make you anxious and often results in people making hasty decisions about their assets.

6. Taking short positions is one way to make money in a bear market, such as selling futures, betting on declines or helping to reduce your portfolio exposure to the market.

Guest blooger George Diaz writes for finance sites: sobredinero.com and Myfinancialwisdom.com. He can be reached at george@sobredinero.com or via Twitter @sobredinero1

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THE VALUE OF TIME

 

3x3 Value of Time

How do you value your time?

What does time mean to you? Do you give your time a value?

I am not just speaking about an hourly wage; I am talking about all the hours in your life. Life is full of activities, challenges, distractions, and obstacles every day. Many people feel they could use a “double” to get everything done. 

A 2008 Forbes article looks at this dilemma, “Time is the most valuable commodity. We never seem to have enough of it. Everyone is time-strapped, time-poor, time-starved. Choose your cliché. Most of us don’t make the most of our time. We wish we did. A self-help industry has flourished on the hope that even if we can’t make more time–the 24 hours in a day remain immutable–we can at least make the most of what we have. Even the most ardent makers of “to-do” lists fritter time away.

Which raises this question to fill an idle moment: Why don’t we value time as we do any other good or service? We could then decide what we do with ours in the most cost-effective way: rationally maximizing our “return on time invested” (ROTI), if you will.”  {Tools for allocating assets}

Ben Franklin said, “Time is Money.” Substitute the word INVESTING for MONEY. Using the word investing as you delegate time may help you to place a higher value on people and experiences. Investing in yourself could be additional education, job training or saving for the future. Investing in relationships could mean scheduling time for valuable activities with family, friends or loved ones. By equating a value to time – it can alter the perspective of your intentions. Being young can give one the sense that everything will last forever, and family and friends will always be there. As people age, many develop a keen sense of time as friends move away or they experience the loss of a cousin, uncle or parent. In retrospect, the personal relationships take on a greater value.

An interesting way to value time is to compare it to a bank account where each person is given 86,400 seconds (dollars) to use each day. Time spent on long-term goals and life-building relations will count more in life. The time lost each night in your account is renewed with a current balance of seconds and minutes to be used again. Consequently, living each day with its sense of promise and possibilities, demands each hour to be lived to the fullest, being “in the present.”

Make space to truly cherish and live – at any particular moment – this week! Celebrate your family, your Mom and those people who you have chosen into your circle of family and loved ones. That is time well spent!

Yesterday is history
Tomorrow is mystery
Today is a gift
That is why it’s called the present!!

-Bob