- - Page 3 of 23 The Finance Gourmet

Making Money with Cryptocurrency

December 6, 2022 by Finance Gourmet

Okay! I get it. You are interested in investing in cryptocurrency. As the recent cratering of bitcoin prices, along with others, at least I won’t have to fight you on the it never comes down thing like I spent the last years of my financial planner days about real estate. So, making money with cryptocurrency is easy or hard, depending on your situation. How To Make Money with Cryptocurrency Alright. I’m going to start kind of from the beginning, but if you are looking for a cryptocurrency explained or cryptocurrency for beginners’ type of information, you’ll have to find that elsewhere. There are a few ways to make money with cryptocurrency. One way is to buy and hold the cryptocurrency, hoping that it will increase in value over time. This is similar to investing in stocks or other assets. Another way is to trade cryptocurrency on an exchange. This involves buying and selling different cryptocurrencies in an attempt to make a profit from the fluctuations in their prices. This is similar to short-term trading in stocks and bonds. Theoretically, you could try and buy cryptocurrency for less on one exchange and sell it for more on another, but this tactic …

How To Choose 529 Investments

December 12, 2022November 17, 2022 by Finance Gourmet

If you don’t already have a 529 plan opened, you should start with the instructions for opening a 529 plan before worrying about which investments you use. Trust me, when I tell you, as a former financial planner, that the biggest drag on saving money for college isn’t choosing the wrong investments, it’s taking too long to get started. No amount of tax advantages will make that up. Most parents overestimate the amount of merit-based scholarships their child can get, and underestimate how much financial aid they may need in the form of loans. Whether you are using education savings accounts, a Coverdell IRA, or a 529 plan, you want to cover as many qualified higher education expenses as you can without loans. The amount you need will be more influenced by need than merit, which means if you have a higher income and higher assets, you are going to pay more. That is just the way the world works right now. The only thing you can really do is deduct all the qualified educational expenses you can from your taxes and pay the rest with tax-free money from 529 accounts and the like. At least then your qualified education …

Active Investment Managers Underperform Indexes

October 5, 2022 by Finance Gourmet

Every year or so, somebody freshens up a study that shows active mutual fund managers underperform passive investing, usually in the form of an ETF of the category benchmark. In plain English: Buying the ETF instead of the mutual fund of the same type will generate higher returns for you over the long-run, and often even the short term. So, why are active investment managers so bad? Mutual Funds Cost Money to Run Mutual funds are not charities. They have expenses they need to cover. Expenses include everything from offices to high paid analysts, to traders to execute the trades, to all of the electronics and equipment it takes to monitor and use all the information in the trading world. Oh yes, then there is the matter of profit. These expenses are disclosed to all investors in the required information made available to any investor in the prospectus and on most trading and investment research platforms. Pulled quickly and semi-random is the Dodge & Cox Stock Fund, a large U.S. stock mutual fund. You will notice that compared to the S&P 500 index listed below, our well-respected Morningstar 5-star fund returns less than the S&P 500 over any time period. …

Did Americans Really Lose $900 Billion in The Recession

October 3, 2022 by Finance Gourmet

Anyone who has been online for more than a day or two knows that the way to get clicks is to have a big, shouting, headline. One popular search engine optimization (SEO) plugin won’t give your title a passing score until it has “a positive or negative sentiment.” Ideally, it also contains a number and a “power word.” Is it any wonder then that financial news headlines scream things like, “Americans Have Lost $900 Billion Since…” or “America’s Richest Tech Billionaires Have Lost $315 Billion In the Past Year?” How Do You Actually Lose Money When the Stock Market Crashes? Let’s talk about investing and losing money. First, we are going to talk about net worth and how much equity you have in your home. It’s for a good reason, I promise. Your net worth is the value of all of your assets minus all of your liabilities. The key word there is all. If your car is worth $15,000 and you owe $8,000 that counts as $9,000 of your net worth. Even that ping pong table in the basement that is worth $50 counts towards your net worth. As you can imagine, this goes off the rails quickly. The …

Fidelity Youth Account for Kids $50 Bonus

September 23, 2022 by Finance Gourmet

Now that the economy is no longer awash in free money, financial companies, banks and brokerages are in customer acquisition mode. New customers tend to stay customers, especially when scary stories on TV or scary circumstances trigger the impulse to stay put. $50 Fee for Fidelity Youth Account You probably started seeing postcards and letters in the mail with local banks trying to seduce you with offers of $200 cash for opening a new account, or something similar. This is a version of that. The idea from Fidelity’s end, of course, is that your child is getting older and if they already have a Fidelity account when they leave and go out into the world, there is a much better chance that they will keep that account than there is that they would find their way back on their own. How Do I Get $50 For Fidelity Kids Account? Fortunately, since this is for a kids account, there are kid sized requirements to earn the $50 bonus. First, the parent must be a Fidelity account holder. If you already are, then you can move to the next step. If you aren’t you have to make a choice about whether opening …

Top 4 Places to Save Money During Recession

September 14, 2022 by Finance Gourmet

It is looking less and less like the U.S. economy will achieve the promised land of a soft-landing and will instead end up in a recession. It may turn out to be a shallow recession, but the economy is not typically forgiving of rapid increases in interest rates. If hiring falls off before the holiday season, then look out below. Where To Save Money During Recession Making smart personal finance decisions during a recession is critical to avoid losing progress on your goals. The four places are the best way to save money during recession and even depressions. Money Market Account – No it’s not sexy, but it is safe, and it should pay more than your basic savings account. Get at least three months of expenses put aside in case you are one of the unfortunate ones who lose their job during a recession. The silver lining on recessions is that rising interest rates means earning more money on your savings accounts and money market accounts. Consider a high-yield online savings account from a bank you trust to earn even more. Pay Off Debt – Alright, this is cheating. Paying off debt isn’t technically saving money, but it will …

Jeremy Grantham Calls S&P 500 Down 26%

February 1, 2023September 12, 2022 by Finance Gourmet

I don’t mean to pick on Jeremy Grantham, I was asked to write something once in my role as a professional financial writer and it got his name stuck in my head. So, whenever I see Mr. Grantham’s name scrolls by on my market news feed, I just have to take a look. I’ve written about Jeremy Grantham prediction history before. Some of Grantham’s calls were great, and everyone seems to remember, but also about the calls that were flat wrong, early, or just money losing. No one seems to remember those. So, let’s do the honorable thing. Let’s see how Jeremy Grantham’s predictions work out this time. Jeremy Grantham Stock Market Prediction Let’s get the details right. On September 8, 2022, Jeremy Grantham told the Reuters Global Markets Forum (GMF) that the S&P 500 could be trading at 3,000 in a year from now. On Wednesday, the S&P 500 index traded from around 3,900 in the morning, to around 3,997 in the afternoon, so we’ll call it 3900ish. If on September 8, 2023, the S&P 500 is trading around 3,000, we can say he is “right” this time. Of course, Grantham called a crash in 2019. He called an …

Power of Compound Interest – A Case Study

January 23, 2023August 17, 2022 by Finance Gourmet

Over at MarketWatch recently, was an interesting article entitled Make Your Kid Rich for $1 a Day. I’ll let you go over there and read the particulars if you are interested. However, I think that the concept provides a great way to study the phenomenon of compound interest, and the elements that go into it. Compound Interest Only Works Over Long Periods People love to quote Albert Einstein saying that the most powerful force in the universe is compound interest. What most people forget is, that as a physicist, Mr. Einstein was used to working on a very large scale, with a very long timeframe. Let’s start at the beginning. Compound interest is not magical. It is merely the phenomenon of earning interest on your previously earned interest. So, if you invest $10,000 and earn 10 percent interest annually, then you would earn $1,000 in interest, and have $11,000 at the end of the year. (Sort of, depending on how interest is paid and compounded, but let’s not quibble.) The following year, you would also earn the same 10 percent interest. However, this time, you earn 10 percent on $11,000, not just the original $10,000. In other words, you are …

Roth 401k and Roth 457 Plans

January 17, 2023July 16, 2022 by Finance Gourmet

By now, many people are familiar with the basic concepts of a 401k retirement savings plan. But did you know there are different kinds of 401k plans? Do you know what a 457 plan is, or what its variation, the Roth 457 plan is? If you already have a good understanding of regular 401k plans, or traditional 401k plans, then it’s pretty easy to see the difference. If not, don’t worry, we’ll walk you through it step by step. Standard Features 401k and 457 Plans The regular parts of a 401k plan are relatively well known. An employer must start and run the 401k plan. Contributions made to the 401k plan are traditionally made with pre-tax dollars. That means that you pay no taxes on the amounts you contribute to a 401k plan. Also, no capital gains taxes or taxes on dividends are due while the money grows inside of the 401k savings plan. In exchange, you cannot withdraw money from a 401k plan prior to age 59 1/2 except in very specific circumstances without penalty. In addition, you will have to pay taxes on the money as you withdraw it from the account. And, finally, once you turn 70 1/2 …