Investing

Worried About Another Black Monday?

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black monday chart

30 years ago, the stock market “crashed” on a single day. It was called Black Monday. At the time, I was in high school. I put aside the newspaper from that day thinking it would be a major collectors item in years to come. It hasn’t, but not because it wasn’t a big event. Black Monday was the name given to the biggest one day drop in the stock market. On October 19, 1987, the Dow Jones Industrial Average plunged 22.6% in one day. Back then, the Dow was still everything. The NASDAQ was the stock market where also-ran stocks that couldn’t qualify for the NYSE traded. The S&P 500 was known to savvy investors, but your average American still didn’t know much about the stock market beyond what showed up in 45 seconds on the nightly newscast. In fact, many of them didn’t own any stocks, unless they had a 401k account at work. Online trading was still in the future, and discount brokers took orders on the telephone. Unlike previous crashes, Black Monday did not start a panic. It did not lead to a depression. The drop was serious, and real. For the rest of 1987, the market …

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Apple Watch Overreaction Buying Opportunity?

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apple watch 3 problems

I don’t like giving short-term stock trading advice, because all of the wrong people end up taking it. Let’s start from the beginning. If you don’t have $100,000 of investable assets in a trading account (not counting 401k, IRA, or other long-term savings accounts), you have no business buying individual stocks of any kind. The ability to make a profit with small stock buys is severely limited. Buy Apple Stock on Watch News Apple recently announced the Apple Watch 3. The big deal for the Apple Watch 3 is that it can connect directly to cellular networks on its own without you having to have an iPhone to connect it to. This is another step in the direction of the watch itself replacing your phone, but for now, it’s mostly a novelty that appeals to Apple technology enthusiasts. Recent reviews have indicated that there are some issues with the Apple Watch connectivity. As a result, Apple stock is down over 2% today. This is a major overreaction, and a buying opportunity if you are looking to invest in Apple shares. The problem, is that the watch connects to Wi-Fi networks that do not have internet connectivity. This is the communication …

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Is Slack a Good Investment

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Is Slack a Good Investment 1

Got some questions about the (semi) big news about Slack getting a new investment. The catchy headlines say that Slack is “now worth over $5 billion”. Of course, with snazzy numbers like that, more than a few readers are wondering if investing in a Slack IPO is a good move. How Much Is Slack Really Worth? First off, let’s back up and do a reality check. Slack is not “worth” $5 billion now. It’s latest funding gives it a valuation of $5 billion, but that isn’t the same thing. Example time! Let’s say I have a company. We’ll use my freelance writing business of ArcticLlama. Now, I don’t have any funding, but if I did, it would work something like this. An investor offers me $1 million for 10% of ArcticLlama. I say yes. So, if the 10% of the company is worth $1 million, then mathematically, the whole company is worth $10 million. That is what a valuation is. This does not mean anyone would actually give me $10 million for the company, just like there isn’t likely anyone out there willing to pay $5 billion for Slack right now either. This is kind of a game, and it’s …

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Why You Shouldn’t Worry About a Market Top

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market top plan

Worried about whether or not the market is overvalued? Did the markets set ANOTHER record? You aren’t alone. Seemingly every day, a major financial website or magazine publishes an article about how the stock market is overvalued, how this is a top, and that you should feel very, very scared. But, should you even bother worrying about a market top? Not if you aren’t talking about short-term investments. If you are talking about a 401k , an IRA, or any other form of long-term investing, you should ignore all the market top talk. What To Do For a Market Top The biggest problem with a market top is knowing WHEN it is going to happen. Remember, the stock market does not move based upon absolute truth. Rather, the stock market is a popularity contest where people vote for companies, or their shares, by buying them, and vote against companies, or their shares, by selling them. It is driven entirely by people (and computer programs made to anticipate people’s reactions, but that is another article). What that means, is even  if the market really is truly overvalued, right now, today, it still does not mean that the sell off will begin …

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Betterment IPO a Distant Future?

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is betterment a good investment

Betterment, one of the robo-advisor firms, raised an additional $70 million in financing this month (July 2017), according to Bloomberg and others. This values the company at $800 million, although such valuations on pre-market companies are largely meaningless. (Mental note: Write article about the so-called valuations of pre-exit startups.) Is this additional Betterment investment a good idea? It all depends on if they can shove a Betterment IPO down unsavvy investor throats. Check out how Betterment works at this Betterment review. According the article, the company has nearly $10 billion under management, which begs the question why they need to raise more money. Update: There is a new CEO. Is the new CEO’s purpose to get the company to an IPO? Check out my Digit app review. A money management company with $10 billion under management should be profitable. The need to raise another $70 million suggests the company is not profitable, and that begs the second question. At what level CAN the company be profitable? An can a Betterment IPO happen fast enough? If you’re interested in Betterment vs Wealthfront vs Robinhood vs Acorns vs Stash I have that here. Can Stand Alone Robo-Advisors Survive? Obviously, as an add-on …

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Another Stock Market Record

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For the past year (and longer) we’ve been reading article after article about how the stock market is set to implode, and yet, here we are… another intra-day record high for the Dow Jones Industrial Index. The Market Will Go Down… Eventually The truth is that the stock market will go down sooner or later. It always does. And, when it does, many of the people writing these now year-old doomsday articles will attempt to claim credit for “predicting” the market crash. (Although, there may not be a crash. A simple months-long 5% correction would take care of a  lot of the market’s pricing issues.) What they won’t do is tell you how much money they would have cost you if you had listened to them while the run up continued. Consider this: The Dow is up over 17% for the 1-year period. In other words, if you had gotten out when last year’s alarm bells started ringing, you would have missed a 17% increase in your investments. That 17% increase would have a very large cushioning effect on any sort of coming 10% correction, or even a 20% crash. In other words, if you had been listening to these …

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What Interest Rate Hikes Mean for Young People

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interest rates young people

I got an email excitedly saying that I should be explaining how interest rate increases will affected younger investors and the personal finances of young people. I didn’t really think that was necessary, but it keeps popping up elsewhere with even more breathless writing copy, so it’s time for a real recipe for Federal Reserve interest rate hikes. Interest Rates and Young People Let’s start from the beginning. Neither interest rates, nor money, nor investments, care how old you are. It all works the same for every age. That being said, it is true that interest rates have been so low, for so long, that anyone under 35 probably has never experienced higher interest rates. So, let’s go over what higher rates are like. History of Interest Rates First, remember that while the Fed has raised interest rates several times since December 2016, they have all been small 0.25% interest rate hikes. The current rate is 1.25% (technically, the Fed sets a range of 1.0% to 1.25%, but for graphing purposes, you’ll see 1.25%.) This is not remotely “high.” In the 1980s, the Fed Funds rate was an astounding 18% to 20%, as they tried to reign in inflation, and …

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Was Buying Jet.com a Waste of Money?

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walmart jet.com waste

Walmart bought Jet.com earlier this year for over $3 BILLION. If you questioned the wisdom of that purchase then, you’re going to love today’s news. It seems that there was a 63 percent increase in online sales during the most recent quarter. That’s good. Even better, most of that increase came from shopping at the flagship site Walmart.com. That’s also good. It seems that the primary driver to this increase was free two-day shipping. That’s great. Check out the Digit review. Free Shipping Equals Higher Online Sales at Walmart You see, all it took to turn Walmart into a bonafide Amazon competitor was to match the latter’s beloved shipping terms. There was no need to panic. All Walmart had to do was take the same website it already had, and offer better shipping terms than it was. There was no need to do anything rash like run out and buy some online shopping company just so that you could say to investors that you were doing SOMETHING. Walmart chief executive, Goug McMillion, even said, “The acquisitions have received a lot of attention, but our plan in ecommerce is not to buy our way to success.” WHAT!?!? Then what in the world did …

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Snap Inc. the Snapchat Company Sued

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It seems that some people are having some buyers remorse after getting in on the Snap Inc., the Snapchat company after the stock failed to maintain its manufactured IPO bump. There is now a class-action lawsuit filed against Snap. If only someone could have seen that a money burning company like Snap going IPO on the promise that more users would someone end the money burning with greater revenues but no extra expenses might not have been the best investment for anyone looking past the, “Hey my kid uses that!” buzz. Oh wait… I might have said something like that. Will Snap Lawsuit Work Against Snapchat Company? Anyway, don’t get your hopes up. This whole thing rests on a former employee stating that Snap overestimated user numbers. The defenses against the suit are both easy and numerous. The company SAID in its pre-IPO docs that the user numbers were not precise and that estimating any number at all was “difficult.” – In other words, even if that employee saw one number, and we went with another number, we already disclosed that. Even if the number was different, the company can argue it isn’t material, so long as all the rest …

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Lowest Cost Mutual Funds No Minimums

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low cost investing mutual funds

When it comes to getting started investing, it is often that first step that becomes the biggest hold up. For many would-be investors the most formidable barrier is actually free, that of setting up an actual account. However, for those with the momentum to cross that line, the next barrier is the cost of investing, most often in the form of a minimum investment. Skipping over these two barriers is one of the things that makes automatic investing apps like Acorns so attractive to new investors. They both eliminate the need to choose and set up a brokerage account and offer a way to get started investing with as little as five dollars. No Minimum Investment Mutual Funds with Low Costs Theoretically, a single investment in a mutual fund with a $1,000 doesn’t sound insurmountable. However, when every reputable financial advisor recommends diversifying your investments among several different funds, that $1,000 minimum quickly adds up to a $5,000 or even $8,000 minimum, to obtain the right kind of diversification. Throw in a 5.25% up-front load for many mutual funds sold by advisors, and that’s a lot of initial overhead. Fortunately, there are many low-cost, do-it-yourself mutual funds that you can …

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