Investing

Windows 10 and Microsoft’s Earnings

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I don’t usually do a lot of analysis of company moves. I just don’t have the time, and often don’t have the insight. But, as a freelance technology writer, I spend a lot of time looking at technology and technology companies. Microsoft is rolling out its new operating system called Windows 10, and it has some interesting marketing and PR behind it. Free Windows 10 Upgrade The first interesting thing about Windows 10 is that it is free. Well…. kind of… and sort of. If you already own Windows 7  or Windows 8, Microsoft will allow you to upgrade to Windows 10 for free, for up to one year. That is, you have one year from now to upgrade to Windows 10 and get it for free. Free? How does this make sense for a publicly traded, profit motivated company? The first thing to understand is that most customers don’t actually upgrade their operating system when new operating systems come out. For retail customers (that is, people who have their own computers that they use and set up themselves) the process of upgrading an operating system is complicated, and unnecessary. After all, if your computer works now, why bother doing …

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Tech Earnings and Stock Market Moves

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The U.S. stock market is composed of thousands of stocks. Of course, when it comes to moving the overall market, some stocks matter more than others. The biggest stocks, those in the S&P 500, and those in the Fortune 500, have some of the biggest impacts on the overall stock indexes. However, in most cases, the news that comes out of those companies is relatively expected. The exception to this rule are the technology companies. Unlike, say oil companies, or big manufacturing companies, it isn’t always easy to use the economic information surrounding them to accurately predict what will happen, especially when it comes to earnings reports. And, with those same companies forgoing the usual “guidance” that other companies provide, what happens in tech company earnings can be a true market moving surprise. This week saw a negative report from industry titan IBM. IBM is not only a household name technology company, but it is also the second highest weighted component in the Dow Jones Industrial Average, commonly referred to as The Dow. The company itself is down over 5 percent so far today, and the Dow is down over 1 percent, or more than 150 points. (Also dragging on …

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What Higher Apple Dividend Means for Investors

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I’m a huge fan of higher dividends. I’m less of a fan of share buybacks, but let’s get there in a minute. Apple Raises Dividend Theoretically, owning a stock means owning a part, or share, of a company. However, if you really break it down, being a shareholder means virtually nothing anymore. For example, in business classes around the country they will tell you that as a shareholder, one of your rights of ownership is voting for the company’s Board of Directors. That’s technically true, but these days, that means nothing. Only a certain number of seats are up for election at one time. Only the candidates that the company’s current management wants are on the ballot. In other words, even if you owned 51% of a company’s stock, your ability to vote would take years to actually affect the company. Your actual avenue for affecting any sort of change is the courts. If you don’t get to “own” the company, then what is your stock actually worth? Well, it is an item of limited supply that others believe have value. It’s the same way U.S. currency works, or Bitcoin. The exception is when a company pays a dividend. Then, …

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Do Young People Invest in the Stock Market?

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Do Millenials Have Money To Invest? A recent Bankrate survey shows that just 26 percent of Millenials say they own any stock. That sounds about right to me. As a former financial advisor, I never conducted any official, statistically valid surveys, of course, but I did talk to a lot of people, many of them younger. Younger people, like Millenials, almost never became my clients. The feeling was mutual. You see, most younger people don’t HAVE any money, even if they are currently making it. If you graduate from college at say 22, and you get a job paying $75,000 per year, then you are doing pretty well. But, you may have student loans; you probably would like to buy a house; you might be getting married and saving for a wedding. Of course, you might also be enjoying your freedom and taking trips, buying cars, and so on. The thing is, even if you were saving 10 percent of your income that still means you only have $7,500 of investable assets after a year. $15,000 the next, and so on and so on. By the time you had even the minimum of $100,000 that makes it worth even a …

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Basic Retirement Plan Simple

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Retirement planning is actually incredibly simple and straightforward for most people. However, it can quickly sound complex because of all the edge cases, exceptions, and possibilities that really only affect a small number of people. If you eliminate all of that noise, however, there really isn’t much to the average American’s financial plan. Follow the following information and there really is no reason you can’t make your own simple retirement plan. Obviously, every situation is different. If you have unusual circumstances such as a coming inheritance, money in trusts, or other legal situations, this plan won’t work for you. If you have regular income, a family, and just need a plan, this is perfect for you. Do It Yourself Financial Plan One of the things that quickly complicates financial planning is the idea that you have to predict how much income you will need in retirement. This step is a waste of time for 90 percent of people. Why? Because, for most people retirement saving and investing is about how much they can save, not how much they will need. To put it another way, consider this. If I tell you that if you can save $10,000 per month, you …

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Is The Tech Bubble Worse than 2000?

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Mark Cuban made his fortune (well, his second bigger fortune) during the first tech bubble (some call it the internet bubble) when he sold Broadcast.com to Yahoo for $5.4 billion in stock. The real financial genius of Mark Cuban turned out to be not so much in the founding and selling Broadcast.com, but in quickly and effectively diversifying his investments (including all that Yahoo stock) before the bottom fell out of the internet bubble. Is 2015 a Tech Bubble? There have been a lot of people wondering for a few years now if technology is once again in a bubble. You’ve seen the big headlines, of course. Facebook bought Instagram for a billion dollars. Yahoo paid over a billion dollars for Tumblr (even though the company was probably quickly running out of money). These days, having a zero revenue company purchased for a billion dollars is commonplace. The idea is that somehow, someway, those users are worth money, even if the current company has no idea, or even plans, to make any revenue off of them. In many ways, this is like the stock market bubble that built up in the late 1990s, when any website was considered a good …

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401k Fees at Supreme Court

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Somehow I missed this until today. The Supreme Court is hearing arguments regarding a new(ish) law about 401k plans. Under something called the Employee Retirement Income Security Act (one of the few legislative acts of recent years that doesn’t have a snappy acronym), a company that has a 401k plan has a fiduciary responsibility to employees in the plan. This means that the company must act in the best interest of the employees. As you can imagine, in U.S. courts this gets pretty nebulous, but it does set a standard. Supreme Court 401k Case In this particular case, the company, Edison International, has a 401k plan with six mutual funds that charge higher fees than identical options. In other words, the plan administrator, through incompetence, or for other reasons chose the more expensive options for the plan. Unfortunately, this is very common. Usually, this isn’t the company, or the HR person, deliberately trying to screw over the employees. Instead, what happens is a 401k company comes in and offers up some proposals. It will say something like, you can have a plan with these investments and it will cost this much, or you can have these other mutual fund investments and …

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Why Cheaper Oil Hurts Stocks

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There is a lot of new lately about lower oil prices hurting the stock market. This comes as a shock to casual investors who are used to HIGHER oil prices hurting the stock market. If lower oil prices are good for consumers, and the consumer drives the American economy, then why would lower oil prices hurt stocks? Short-Term Stock Price Movements First, never forget that short-term stock price movements are much more about speculators maneuvering for quick profits than about the actual value or prospects of the stocks in question. One way to calculate a company’s value is it’s market capitalization which is the number of shares outstanding the company has times the company’s share price.  As I write this, for example, IBM has a market capitalization of $154.76 billion dollars. However, it’s stock is down approximately $3 per share from yesterday. That means that, theoretically, the company was worth $157.85 billion dollars yesterday. No matter what the price of oil is, there is no way that anything changed enough to make IBM worth $3 billion dollars less than yesterday. Short-term price fluctuations are the result of supply and demand. And, since a large majority of daily trades are actually between computers, …

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Your First Basic Financial Plan

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As a former Certified Financial Planner, or CFP, I tend, like many other financial experts, to think (and write) in terms of the tricky, the convoluted, and the complex. The truth is that money and personal finance can be very intricate and complex. However, it is also true that the biggest bang for the buck financial planning wise comes from doing the most basic things. Too often, we get caught up in things that actually end up being tiny details of your overall financial life. For example, many people shop endlessly for higher savings account interest rates. Whether you have a high-yield savings account, a regular savings account, or even a kids savings account, the interest rate matters far less than how much money  you put in it. If you have $10,000 and you put it in a regular savings account earning 0.5 percent, your interest for the year will be approximately, $50. If you got double that rate, 1.0%, then you’d have $100 in interest. In either case, you would still basically just have $10,000 at the end of the year, $10,050 or $10,100, respectively. Neither has a meaningful impact on your overall financial status. On the other hand, if …

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Saving Money Into 529 Plan

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OK, if you have already opened a 529 plan, and you have chosen which investments to use in your 529 plan, then the next step is to actually start getting money into your college savings account. And, it is here where the most important thing about saving money for college comes into play. The most important thing, more important than choosing the right college savings plan, more important than choosing which investments to use in your college savings plan, and more important that updating your higher education financial plan, is consistently automatically investing money in your college savings accounts. Let me go into a little more detail, it’s that important. We get caught up in the notion that what matters when saving or investing money are things like investment returns, taxes, using the right account, or getting the right financial advice. None of those things matters nearly as much as consistently investing more money. When I was a financial advisor some of the biggest 401k accounts, or 457 plans, I ever saw were from people who didn’t know a thing about them. These people opened the account when they were hired, set some sort of amount to contribute, picked an investment, or …

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