Bull Market Vs Bear Markets: Introduction to the Stock Market

Bull Market Vs Bear Markets: Introduction to the Stock Market

Been a while Frugal folk, but in light of recent market activities and with me being bored at work since school is out until January, I decided to give you newbies an introduction to the learning about the stock market.

In my opinion, we will always need oil. Maybe not as much be it definitely will not disappear in our lifetime.With the recent decline in oil prices and shares I believe that oil will not stay this cheap for long. Many OPEC members cannot fund budgets with oil prices below $100, especially not at $50. Eventually OPEC will be forced to cut production which will boost oil prices again. Also, with oil prices so low, US shale producers will be forced out of business which will reduce supply and give oil prices a boost. Take that how you want and with a grain of salt. There's definitely a higher game of chess better yet monopoly going on. But anyhow....

First off: The stock market is usually described as being in two types of trends: A Bull market or a Bear market. For simplicity and ease of understanding: “Grab the Bull by the horns, run from the Bear”

**DISCLAIMER**

Let me emphasize here that despite the analysis that will be given below, the stock market is seldom a feast or famine affair. Just like any other industry there is a science both mathematical and social behind it, whether logical or illogical. There are stocks to buy in very bad markets, just as there are stocks to sell when the sky is looking the clearest.  This analysis is intended to make you aware of extreme danger signals and of exceedingly attractive opportunities like solar energy (*shameless plug*). “Everything is relative” and successful investing results from having knowledge, information, and insight.

Bull Market:

If the trend is on the buy side, then the market goes up and we have what is called a “bull market”.

Bull markets usually last twice as long as the declining Bear trends. However, booming business cannot last forever, it is important to know what warning signs to watch for during the last stages of a bull market aka when you need to get your money out.

Characteristics of the Final stages of a bull market:

1)      Business is usually very good near the top of a market.

2)      Investors are enthusiastic and full of confidence

3)      Wide public participation. Number of stockholders in the country takes a sudden spurt. Way more buyers than sellers.

4)      Stock splits are commonplace.

5)      Bonds are yielding way more than stocks.

6)      Bond prices fall sharply

7)      Key stocks in the market begin to fade and sell off

8)      The market doesn't react, as it used to, to good news.

-When you begin to spot these factors it might be time to start taking a conservative approach to your investing plan. Don’t be greedy and try to extract the last ounce of profit from a diminishing market!

Bear Market:

If people are altogether pessimistic and are mostly on the sell side, stocks go down and we have a “bear market”.Bear markets can last anywhere from one to five years from a historical standpoint. With that being said, it is potentially advantageous if one can get into the bear market in its final stages before it switches into a bull market. 

Characteristics of the Final stages of a bear market:

1) A sharp decline in blue chip stocks is a sign that the end of the bear market is approaching. As the decline comes to an end there are real bargains in the market.

2) The market becomes resistant to bad news (announcements that used to cause stocks to sell now have no effect.)

Money Management Apps

Greetings Frugal Folk, 

Mobile apps are quickly becoming one major way we run our lives. Think about it, you use your phone for more than just texting and calling but also for GPS and a music player; why not use it as a personal finance manager as well? I know how it is these days. Whether you are grinding to the top or just plain busy, here a few cell phone and computer apps that I use or have heard good things about. 

 1. Mint: Mint allows you to organize all of your personal finance accounts into one place so you can manage your money a little better. You can keep tabs on your spending, create a nice budget, and even get bill alerts and reminders from checking, savings, and credit cards.

2. Check: Check lets you recall when payments are due and to create monthly budgets. It stays on top of your bills, budget, and money for you, so that you do not have to worry about missing a payment or late fees.

3. Doxo: This app allows you to combine all of your important family information into one organized space, helping you move way past financial management and into family and home finance management. It lets you back-up important family documents and other neat features as well. 

    

4. SigFig: This app lets you design a professional investment portfolio, check on it, and automatically make changes to keep it on track. You can sync accounts like Fidelity, Schwab, E*Trade, and Scottrade.

5. Toshl Finance: This app tracks all of those morning Starbucks cups, Chipotle lunches, and Circle K gas fill-ups. It was built with the concept that knowing where your money is at all times is the first step to financial freedom.

6. Spending Tracker: Spending Tracker helps you to trace your budget so that you are better able to save money.

7. Expensify: This mobile app is for business owners and aspiring entrepreneurs who have to track their business expenses for reimbursement or tax purposes. They have a “SmartScan” technology that reads receipts and records the expense. Expensify helps track your mileage and record your business related travel.

8. Mvelopes:  Mvelopes is pretty cool because it allows you to put cash into different envelopes, each labeled with a different section from your budget. 

*Links to each app or website are attached above*

As Always......Live Frugal, Stay Gold

Photo credit: http://www.lowestrates.ca/blog/money-management-mobile-world-our-top-5-financial-apps

Automatic Savings

Having a automatic savings plan or method is very easy these days thanks to technology like e-checking , e-savings, and various money management apps. Here are a few ways to get your savings in order:

1. Divide your net income into percentages.

Whether it’s part or full time money, scholarships, or babysitting money all of the money you receive in a month, or a portion of your regular paycheck, should be divided percentage wise into certain funds for savings and investments or personal goals like getting out of debt/saving for a house down payment. I personally save 30% of every check I receive into my savings account for example. Identify an account to funnel these earnings into and deposit them into that account immediately. No amount is too small; even if it is $5/ week starting off, your savings will grow quickly through the benefits of compound interest.

2. Save your tax refund.

If your savings account already contains 6–12 months of emergency expenses(the norm), consider plugging your tax refund directly into your IRA or higher interest savings account. If saving all of your tax refund or any other refund like school is too hard try saving 50% and using the other 50% for needs and not wants.

3. Regularly deposit into savings.

Automated deposits are easy and effective because they take money directly from your paycheck and put it where you need it – into a savings account for living expenses or foreseeable emergencies for example.  Experts say a year’s worth but imo that's a lot starting off. Focus on building the habit of saving then focus on how much you're saving.  Also, try opening multiple savings accounts naming them the reason why you're saving. For example, I have a savings account named: 67 Mustang. I only send $2 a week to it but it's a start.

4. Favor interest-bearing accounts.

Once you’re saving, make those accounts work for you! Do your research online, or call up a bank representative to learn which accounts bear the most interest at your institution. Often something as simple as keeping less in your checking, which typically has a low interest rate due to the fluidity of the account, and more in your savings, can result in larger gains over the course of the year. Also, some banks offer higher interest checking account rates than others, which makes your money work harder for you. Check into Ally , the online bank.

5. Use a cash-back credit card.

When you spend, do so with a credit card that earns you cash back. Like any credit card, remember to treat it like cash, buying only what you can afford at that moment and paying it off regularly.

6. Household accounts.

Some banks offer benefits for “house holding,” or consolidating checking, savings, investment, insurance, and other accounts at the same bank. Others offer cash incentives or higher interest rates to those who meet a certain threshold of net investment with the bank. This is free money, so it’s worth a call to your bank to find out if they offer such a program, or shop around for a bank that does.

7. Know your bank’s rules.

Some banks charge a fee after a certain number of transactions between checking, savings, and/or investment accounts per month, or cap the amount of money that can be transferred in a single transaction or 24-hour period. Know your financial institution’s rules, and plan accordingly. You can also get around these fees by calling your bank and causing enough rucus. Be frugal, every little dollar adds up.

8. Automate bills.

You can’t become wealthy if you are always being hit by late fees. Save yourself the cost of all those stamps, by automating as many payments as you can. Once you have a cash-rewards credit card, paying bills from your card can increase your benefits even more.

As Always.......Stay Frugal, Live Gold.

5 Money Mistakes

Been a while my frugal friends. Hope you all have been thinking conservatively and saving money along the way.

Today I just want to highlight a few common money mistakes that we all make in this money management game of life.

1) You do not save any money:

• Yes, I know a majority of you all are either in college, graduate school, or just beginning your careers, however, setting aside just a small portion of your salary is a good habit to form. Treat your savings account as your most important bill – it’s for you, and you shouldn’t short change yourself!. (Always Pay yourself first!)

2) You join too many clubs: 

• If you have memberships to Sam's Club, Costco, and other club stores you might as well go ahead and cancel that money wasting membership. Instead consider joining a friend's account as an additional user.  

3) You waste food:

• Track your diet! It is not only good money wise, but health wise as well. There are various apps and websites like 9 Organic meals for $100. 

4) You buy things you do not need:

• If you can’t decide between an Xbox One and a PS4 or whether or not you want those Jay Z/Beyonce concert tickets versus new shoes then you might not need either at the present time. Have fun and treat yourself but not at the expense of your financial health. 

5) You Lack Patience: 

• Yes, I know the struggle is real regarding staying consistent with a budget but make sure you are thinking long term! The goal is not to become rich but to have wealth. Also be sure to treat yourself! Don't hoard every last penny like some weird cat lady. 

As always people: Stay Frugal, Live Gold

Introduction to Investing

By now you all should be saving, budgeting, and consciously spending your money with the help of the previous blogs. If not you should check those out before you read this new post.

If you're like most young adults, you're curious about investing and the stock market but don't know where to start. I've scoured the internet and a couple books to find information to help those just starting including myself. So basically, I've done all the work and you can reap the benefits with your lazy ass.

I have a couple sites divided by topics to help you all out:

Online Investor Tutorial Sites:

1. beginnersinvest.about.com
2. www.aaii.com/invbas
3. university.smartmoney.com

Now while you're diving head first into all of these new tutorials with all of this new jargon you can use this site to look up the exact meaning of unfamiliar words.

www.investorwords.com

The most important factor with any investment is doing your research:

Research:

1. www.socialfunds.com
2. www.socialinvest.org
3. www.bloomberg.com
4. www.ft.com
5. investors.com
6. nytimes.com

Now after you've done your homework and research here are a couple sites that allow you to practice your newly acquired skills with play money without any penalties. Sort of like Fantasy Football. Some require a fee but it would be non frugal of me to recommend those.

Simulations:

1. www.marketocracy.com
2. virtualstockexchange.com

Conscious Spending

“Create a budget!” is the sort of redundant advice that personal-finance experts feel good prescribing, yet when real people read about making a budget, their eyes glaze over faster than a fat girl’s lips at Krispy Kreme. Who wants to track their spending? The few people who actually try it find that their budgets completely fail after a few days because tracking every penny is overwhelming. A 2007 survey by bankrate.com, 75 percent of Americans said they have a budget—which is complete nonsense.

The Difference between Cheap and Frugal

Let’s first dispense with the idea that saying no to spending on certain things means you’re cheap. If you decide that spending $2.50 on Cokes when you eat out isn’t worth it—and you’d rather save that $15 each week for a haircut—that’s not cheap. That’s using frugality to drive conscious spending. (Hence the name of this blog being Frugal Freddy…)Unfortunately, most Americans dismiss frugality because they confuse it with cheapness, thinking that frugality is all-or-nothing: “Frugal people don’t spend money on anything! I’m never going to cut all my spending, so forget it.”

Frugality isn't just about our own choices, though. There’s also the social influence to spend. Call it the Real House Wives/ Air Jordan’s effect…. (FYI 95% them are broke in real life) where your friends’ spending directly affects yours. Next time you go to the mall, check out any random group of friends. Chances are, they’re dressed similarly—even though chances are good that they have wildly different incomes.

Frugality isn't about cutting your spending on everything. That approach wouldn't last two days. Frugality, quite simply, is about choosing the things you love enough to spend extravagantly on—and then cutting costs mercilessly on the things you don’t love.

Conscious Spending Plan

A Conscious Spending Plan involves four major buckets where your money will go: Fixed Costs, Investments, Savings, and Guilt-free Spending Money.

MONTHLY FIXED COSTS

Fixed costs are the amounts you must pay, like your rent/mortgage, utilities, cell phone, and student loans. A good rule of thumb is that fixed costs should be 50–60 percent of your take-home pay. Before you can do anything else, you’ve got to figure out how much these add up to.

Check out the chart on the next page with common basic expenses (the bare minimum that any ordinary person would use to live). If you see any glaring omissions for major spending categories, add them. Notice that I didn’t include “eating out” or “entertainment,” as those come out of the guilt-free spending category.

LONG-TERM INVESTMENTS

This bucket includes the amount you’ll send to your 401(k) and Roth IRA each month. A good rule of thumb is to invest 10 percent of your take-home pay (after taxes, or the amount on your monthly paycheck) for the long term. Your 401(k) contributions count toward the 10 percent, so if you already participate in a 401(k), you’ll need to add that amount to your take-home money to get a total monthly salary.

SAVINGS GOALS

This bucket includes short-term savings goals (like Christmas gifts and vacation), midterm savings goals (a wedding in a few years), and larger, longer term goals (like a down payment on a house).

To determine how much you should be putting away each month, check out these examples. They’ll shock you:

    GIFTS FOR FRIENDS AND FAMILY. In 2011 Americans spent around $900 on Christmas gifts. If you’re an average consumer and want to pay for your gifts without going into debt, that means you need to save $75/month for your Christmas gifts. (And what about birthday gifts?)

     YOUR WEDDING (WHETHER YOU’RE ENGAGED OR NOT). The average wedding costs about $28,000. The average wedding age is twenty-seven for men and twenty-six for women, you can figure out exactly how much you need to be saving, assuming you want to pay for it without help or debt: If you’re twenty-five years old, you need to be saving more than $1,000/month for your wedding. If you’re twenty-six, you should be saving more than $2,300/month.

     BUYING A HOUSE. If you’re thinking about buying a house in a few years, log on to www.zillow.com and check home prices in your area. Let’s just say the average house in your neighborhood costs $300,000 and you want to do a traditional 20 percent down payment. That’s $60,000, so if you want to buy a house in five years, you should be saving $1,000/month. Crazy, right? Nobody thinks like this, but it’s truly eye-opening when you plot out your future spending for the next few years. It can almost seem overwhelming, but there’s good news: The longer you have to save for these things, the less you have to save each month.

GUILT-FREE SPENDING MONEY

After all that spending, investing, and saving, this bucket contains the fun money—the stuff you can use for anything you want, guilt-free. Money here covers things like going out to restaurants and bars, movies, and vacations.

Depending on how you've structured your other buckets, a good rule of thumb here is to use 20 percent to 35 percent of your take-home income for guilt-free spending money.

SET REALISTIC GOALS

Though it might not seem like a big deal, small distinctions make all the difference in the world...i.e. simply “saving” versus “saving for a down payment”. Saving with a goal—whether it’s tangible like a house or intangible like your master’s degree—puts all your decisions into focus.

SET UP A SPECIFIC ACCOUNT. Another key difference was how I was saving. I opened up an Ally savings account and named 3 accounts “Down Payment, Vacation, and School” and regularly transfer in the amount I had determined I wanted to save each month.

USE THE ENVELOPE SYSTEM TO TARGET YOUR BIG WINS

All this conscious spending and optimizing sounds nice in theory, but how do you do it? I recommend the envelope system, in which you allocate money for certain categories like eating out, shopping, rent, and so on. Once you spend the money for that month, that’s it: You can’t spend more. If it’s really an emergency, you can dip into other envelopes at the cost of spending in that category. These “envelopes” can be figurative (like in Mint or Excel) or literally envelopes that you put cash in. This is the best system I've found for keeping spending simple and sustainable.

And when it’s gone, it’s gone.

The best part about setting up a strategic budget is that it guides your decisions, letting you say no much more easily—“Sorry, it’s not in my plan this month”—and freeing you up to enjoy what you do spend on. This is guilt-free spending at its best.

Tiger Tracks WEEK FOUR:

1) Get your paycheck, determine what you’ve been spending, and figure out what your Conscious Spending Plan should look like. Don’t over think it. Just break your take-home income into chunks of fixed costs (50–60 percent), long-term investments (10 percent), savings goals (5–10 percent), and guilt-free spending money (20–35 percent). 

2) Optimize your spending

3) Maintain your Conscious Spending Plan

401 k and IRA

Ask any of your friends how much they’ve invested and they’ll say things like, “Huh?” or “I don’t earn enough to invest.” Most of them will say, “I don’t know how to pick stocks,” which is crazy because INVESTING ISN’T ABOUT PICKING STOCKS. Although it’s true that some of them might participate in a 401(k)—a type of retirement account—that’s probably the extent of their investments.

401(k): 

A 401(k) is just a type of investment/retirement account—one that offers huge benefits which include:
1) Money isn't taxed for many years (tax-deferred until the age of 59 1/2)

2) Free money with employee match

3)Automatic Investing

Out of employees age 25 and under:

1) Less than 1/3 participate in a 401(k);
2) Less than 4 % max out their contributions;
3) Only 16 % contribute enough to get the full company match. The company match is literally free money, so 84 % of young employees are losing thousands of dollars per year because they haven’t spent a few hours to learn how this stuff works.

The Ladder of Personal Finance


Track 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100 percent of the match. A “401(k) match” means that for every dollar you contribute to your 401(k), your company will “match” your contribution up to a certain amount. For example, for easy math, let’s assume you make $100,000. A “100 percent match up to 5 percent of your contribution” means that you’ll contribute $5,000 and your company will match it with $5,000. This is free money and there is, quite simply, no better deal.

Track 2: Pay off your credit card and any other debt. The average credit card APR is 14 percent, and many APRs are higher.

Track 3: Open up a Roth IRA and contribute as much money as possible to it. (As long as your income is $101,000 or less, you’re allowed to contribute up to $5,000 a year.)

Track 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it (this time above and beyond your employer match).
The current limit is $15,500.

Track 5: If you still have money left to invest, open a regular nonretirement account and put as much as possible there.


401 k facts: 
1) If you need the money you can be penalized around 10% for early withdrawal but there are certain exceptions: medical expenses, buying a home, education.
2) Tax deferred not tax free
3) If company offers 401 k but no match, open anyway. Pay off debt with extra money and max out Roth IRA.

If you switch jobs:
1) Roll over 401 k into an IRA (preferred).
2) Roll old 401 k into new 401 k

Roth IRA: 


A Roth IRA is another type of retirement account with significant tax advantages. It’s not employer sponsored—you contribute money on your own. Every person in their twenties should have a Roth IRA, even if you’re also contributing to a 401(k). It’s simply the best deal I’ve found for long-term investing.

One of the benefits is that it lets you invest in whatever you want. Whereas a 401(k) has an array of funds that you must choose among, a Roth IRA lets you invest in anything you want: index funds, individual stocks, anything. A second difference has to do with taxes: Remember how your 401(k) uses pretax dollars and you pay taxes only when you withdraw money at retirement? Well, a Roth IRA uses after-tax dollars to give you an even better deal. With a Roth, you invest already-taxed income and you don’t pay any tax when you withdraw it.

Roth IRA facts:
1)You contribute your own money, no match.
2)Invest in what you want.
3) No taxes after you withdraw
4)You do not pay taxes on  the earnings.
5)Penalty if you withdraw early..some exceptions
6) You can withdraw the principal (amount you contribute) after 5 years.
7) If you make more than 100,000/yr there are restricitions on how much you can contribute..see traditional IRA
8)Over a certain income you aren't eligible for a roth IRA....see traditional IRA.
9)Start with at least $50-$100/month. I know Fidelity requires at least $100/month.

To start a Roth IRA, you’re first going to open an investment brokerage account with a trusted investment company. I use Fidelity, but companies include Scott-trade, t.rowe price, Vanguard, Schwab, etc.



Tiger Tracks Week 3:

1) Open your 401(k). Get the paperwork from your HR manager and fill it out.

2) Come up with a plan to pay off your debt. I can't stress this enough.

3) Open a Roth IRA and set up automatic payment. Send as much as you can, but even $50/month is fine