ReportWire

Tag: Finance

  • Investing Mistakes During a Recession

    Investing Mistakes During a Recession

    [ad_1]

    As worries grew about the Federal Reserve and other central banks being willing to bring on a recession to control inflation, stock prices plunged on December 16, 2022.


    Due – Due

    This is the second straight week that the Standard & Poor’s 500 has lost 1.4%. It fell by 407 points, or 1.2%, on the Dow Jones industrial average to 32,796 points and by 1% on the Nasdaq composite.

    Investors’ hopes for interest rate cuts next year were dashed as well when the Fed raised its forecast for how high interest rates will ultimately go.

    Inflation, while down from its highest levels in decades, remains painfully high. As a result, the Fed has kept raising interest rates to slow economic growth to maintain its aggressive attack on prices. The danger, however, is that too much braking could send an already sluggish economy into recession.

    The risk was highlighted by S&P Global. According to the report, inflation slowed business activity this month. Even with the sharp drop, inflation pressures have eased.

    But, if history is any indication, the future isn’t looking too bright.

    According to Fed forecasts, inflation will slow next year due to rising unemployment. Despite this, the Fed’s own projections show prices still rising at an unacceptable rate by year-end 2023, with inflation at 3.5%.

    Why’s that concerning?

    Inflation has been running at 3.7% or higher during every recession since 1960 except the pandemic-induced downturn of 2020. It was only in 1974 that inflation was higher than 2.7% when the recession ended.

    While we don’t have a crystal ball to predict the future, it wouldn’t hurt to prepare for a possible downturn. And, one area to focus on is avoiding the following investing mistakes during a recession.

    Immediately selling your holdings when they begin to fall.

    When the economy is in recession, the stock market becomes highly volatile. As a result, you might be tempted to cut your losses when you see all your investments tank on the trading screen. However, when investments fail, you should not unload them.

    Why? Well, here are three reasons why you should hold onto your investments.

    If you sell during a downturn, you could lose money.

    As a result of a market downturn, stock prices decline. The prices of investments were likely higher when the market was booming, so you likely paid more for them. In other words, if you sell during a downturn, you might end up losing money on your investments.

    Remember that you will never lose money unless you sell, no matter what the market does. The only way to lock in your losses is to sell when prices are lower, even if your investments decrease in value. In short, a good way to avoid losing money is to hold onto your stocks until the price recovers.

    There is no way to predict the market.

    If you want to maximize your returns, you should buy stocks at their lowest prices when the market bottoms out, and sell when the market peaks. The strategy is called timing the market, and while it sounds smart, executing it successfully is extremely challenging.

    There is no way that anyone can accurately predict what will happen in the stock market, not even the best investors. Even a small error in timing can result in a lot of losses in the stock market.

    As an example, consider the 2020 market crash during the early stages of the COVID-19 pandemic. In just a few weeks, the S&P 500 lost more than one-third of its value. By selling your investments shortly after prices started to fall, you would have not only locked in your losses but also locked in higher profits. Also, you could have missed the near-immediate recovery of the market.

    By timing the market, you might buy during high prices, sell during their lowest, and rebuy during high prices. When you hold onto your investments through the rough patches, though, you’re more likely to come out on top.

    A healthy company should see its price rebound.

    Stock markets are volatile, but companies with strong, healthy balance sheets have a better chance of bouncing back.

    It is important to understand a company’s underlying business fundamentals in order to determine its strength. Asking the following questions can help you determine this:

    • In its industry, does it have a competitive advantage?
    • Are its leaders capable of making good business decisions during challenging times?
    • Is it financially healthy?

    In the long run, your investments should rebound after periods of volatility if you invest in solid companies. In times of market turmoil, it’s best to hold onto your investments and ride out the storm.

    Strictly limiting investing amid volatility.

    While some investors sell when the market dips, others don’t invest at all. In fact, according to a recent survey from Allianz Life, 65% of investors keep “more money than they should” out of the stock market.

    “We’re more fixated on what we could potentially lose on paper than what opportunities pass us by that we never capitalize upon,” said Josh Reidinger, CEO of Waverly Advisors in Birmingham, Alabama, which ranked No. 59 on the FA 100 list.

    If you stay away from the stock market, you might miss out on some of the best returns. As a matter of fact, over the past 20 years, the top 10 performing days occurred after big stock market declines in 2008 and 2020, during the beginning of the Covid-19 pandemic, according to Morgan Asset Management.

    “History does not repeat itself,” Reidinger said. “But it’s a pretty good indicator of where we are going.”

    Buying stocks at their lowest points

    Stocks might be at their absolute lowest when you’re investing during a period of economic instability. Again, it’s possible to miss out on some profitable opportunities if you try to time the market that way.

    In a recession, it’s best to invest consistently at regular intervals. The only thing that matters is if that stock goes up in value eventually, not if you buy it at its lowest point.

    A recession can present a number of challenges when it comes to investing. However, knowing what mistakes to avoid can save you from having to live with regrets in the future.

    Not understanding what you are investing in.

    During recessions, Pamela Capalad, a financial planner at Brunch & Budget, says investors are tempted to invest in new, trendy investments. “Avoid anything that you didn’t understand before the recession,” she says.

    For instance, if you are unfamiliar with cryptocurrency and desperate to invest in it, now might be a bad time. Capalad says, “Ultimately, it goes back to: Do you understand what you’re investing in? Do you understand why you’re investing in crypto? Do you understand how crypto works?”

    “Crypto was one of the first things to take a dive when there was any hint of recession because crypto is currently all speculation,” she adds. “It’s really easy to ride a trend, especially when it’s going up.”

    Investing without diversification.

    Putting all your eggs in one basket isn’t a good idea. In general, investing in only a handful of stocks can be risky. The risk is even higher during a recession. However, by diversifying your capital across several assets, you’ll be able to mitigate losses if one or a few of your bets don’t work.

    In a recession, exchange-traded funds (ETFs) give you exposure to a diverse group of high-quality stocks through index-tracking ETFs, helping you avoid these mistakes.

    There are 2 basic types of indexes:

    • A market index such as the S&P 500 is a measure of the overall market.
    • An index which tracks a much more targeted subset of the overall market, such as small-cap growth stocks or large-cap value stocks. A bond index, a commodity index, and a currency index are also available.

    ETFs based on indexes seek to replicate the return of the market or subset of the market they aim to replicate, less their fees. The ETF market price will differ from the fund’s net asset value, so index ETFs do not track the underlying index perfectly.

    Generally, indexes based on subsets of the market compete with broader indexes based on the entire market. A small-cap index, for example, is typically compared to a broader index on the entire market by investors.

    What are the best ETFs to buy for a recession? Some suggestions include:

    • Schwab U.S. Dividend Equity ETF (SCHD)
    • SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
    • iShares 0-3 Month Treasury Bond (SGOV)
    • Vanguard Consumer Staples ETF (VDC)
    • Vanguard Utilities Index Fund ETF (VPU)
    • Health Care Select Sector SPDR Fund (XLV)
    • Vanguard S&P 500 ETF (VOO)

    Checking your portfolio 24/7.

    Making investment decisions based on the market’s movements and constantly fretting over your portfolio’s value during a downturn is unlikely to be profitable. Continually checking indicates worry, which could lead to emotional decisions. You should check your portfolio once a week if you can. Occasionally, big down days follow big up days.

    In addition, if you participate in a workplace retirement plan like a 401(k), you’re likely adopting the practice of dollar-cost averaging. In this method, investments (typically mutual funds) are consistently purchased over time. With this strategy, you buy fewer shares when prices are high and more shares when prices are low.

    You listen to the “experts.”

    There’s no way Mad Money, Squawk Box, and Closing Bell along with their panel of supposedly “expert” money managers are going to predict when this recession will end.

    No offense. But, it’s all for entertainment.

    You may think that I’m being too harsh here. However, lead author Nicola Gennaioli examined stock prices, dividends, and data over the past 35 years to compare them with recommendations made by market experts. In his study, his team found that investing in the 10 percent of stocks most recommended by experts yielded, on average, a three percent return. In contrast, investors who invested in the ten percent of stocks least recommended by experts earned 15 percent returns on average!

    Not safeguarding your retirement.

    “Building an investment plan is like formulating a diet plan – totally dependent on your goal,” writes Sanjay Sehgal in a previous Due article. “When you visit your dietician for instance, one of the first questions asked is about your goal – Do you want to lose weight, build muscle, or you wish to celebrate food?”

    “But moderation, as any good dietician will tell you is the key; it’s only when everything you need is in your plate, in the right quantities, that you can achieve your goal, as well as enjoy each bite and every taste,” he adds. “A dietician’s plan begins from this understanding.

    “Investments also need planning, and this planning should be based upon your risk-taking ability and your life goals.”

    Consequently, we should plan our investments based on a post-pandemic financial horizon that will differ from anything we know. This now involves recession-proofing your retirement investments by following these steps:

    • Take care of your health. Occasionally, there are pandemics, recessions, depressions, or high inflation rates. As a result, during a crisis, you would have a better chance of thinking clearly, taking action, and even protecting yourself against other risks.
    • Have an emergency fund. An emergency fund should be equal to 6 months’ worth of income. In the event that you lose your job and unemployment is high, that is not going to save your life. But you will have some options and options for adjusting.
    • Live within your means. Adapt your living expenses to match your retirement income. By living within your means during the good times, you will be less likely to go into debt when gas prices go up and more able to adjust spending in other areas.
    • Stay in the market. There is always a risk associated with investing in the stock market. In exchange, you typically get higher returns over time than you would from savings accounts, fixed deposits, etc. Occasionally, the market dips, and your portfolio may suffer, but it will pass.
    • Invest for the long term. What if your investments drop 15% as a result of a drop in the market? You won’t lose anything if you don’t sell. You will have plenty of opportunities to sell high in the long run, since the market is cyclical. Buying during a down market may end up paying off later on.
    • Diversify your investments. Diversification reduces your portfolio’s market risk. Regardless of what the market does, diversification keeps a portfolio healthy. The market may fluctuate, but a portion of your portfolio may respond positively and offset some negative effects.

    Cash is where you stay.

    As a result of this mistake, panic selling is compounded. After a market downturn, stock prices often rebound strongly, showing how bailing out can cost you when the market turns around.

    To be fair, holding cash makes sense if you have short-term spending needs or are building an emergency fund. When your long-term financial goals are decades away, it makes no sense to hold a large position in it as part of your investment portfolio.

    It is advisable for investors who have excess cash because they sold during the market slide, or for any other reason, to close the gap and invest. It is possible to get back into the market gradually by buying set amounts of stock at regular intervals (say, monthly) using dollar-cost averaging. In many cases, dollar-cost averaging can make it easier for fearful investors to move out of cash, since they won’t have to worry about putting lots of money into the market, only to see it sell off again. As a result, if the market recovers, they will be glad they already put some of their money back to work rather than leaving all of it on the bench.

    You don’t consult an investment professional before making a large investment.

    As humans, we all make mistakes. And, occasionally, we make these mistakes because we all let our emotions get the best of us. In the end, though, you’ll get into trouble when you make decisions based on feelings rather than facts.

    How can you keep things in perspective and make sure your investments are on track? Consult a professional for investment advice. When you have a pro on your side, you’re more likely to stay focused on your long-term goals and stay as cool as a cucumber.

    FAQs

    1. What is a recession?

    After a period of growth, a recession is typically defined as two consecutive quarters of declining GDP (gross domestic product).

    According to the National Bureau of Economic Research (NBER), a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”

    2. What causes recessions?

    Many things have led to recessions in the past, but economic imbalances are typically the cause. For instance, the 2008 recession was caused by excess debt in the housing market. Unexpected shocks can also lead to job cuts, like the COVID-19 pandemic.

    Economic growth, earnings and stock prices are all put under pressure when unemployment rises. An economy can be thrown into a vicious cycle by these factors. In the long run, recessions are necessary to clear out excesses before the next boom.

    3. How does a recession affect the stock market?

    Although recessions are hard to predict, it’s still smart to think about how they might affect your portfolio. Historically, bear markets (market declines of 20% or more) and recessions (economic declines) have often overlapped, with equity markets leading the economic cycle by 6 to 7 months on the way down and back up.

    Even so, market timing moves can backfire, like moving an entire portfolio to cash. It’s often the late stages of an economic cycle or right after a market bottom that yield the best returns. In down markets, dollar cost averaging, where investors invest equal amounts at regular intervals, can help. Investors can buy more shares at lower prices while staying positioned for when the market recovers.

    4. How long do recessions last?

    Since 1854, the average recession has lasted 17 months, according to the NBER. Generally, recessions in the U.S. have lasted about 10 months since World War II, with recessions typically lasting much shorter. However, a recession can last much longer than that. For example, the Great Recession of 2007 – 2009 lasted 18 months. Conversely, it can last only a short time. The COVID-19 recession of 2020, for instance, lasted for only two months..

    5. What should you do to prepare for a recession?

    Before and during a recession, investors should remain calm. It’s especially true during times of economic and market stress that emotions can sabotage investment returns.

    Although recessions can’t be predicted, it’s important to maintain a long-term mindset. Ensure your portfolio is designed to be balanced so that you can take advantage of growth periods before they happen while remaining resilient during volatile periods.

    The post Investing Mistakes During a Recession appeared first on Due.

    [ad_2]

    Albert Costill

    Source link

  • How to Calculate a Brand’s Real-Dollar Value Before Acquisition

    How to Calculate a Brand’s Real-Dollar Value Before Acquisition

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Measuring brand value and equity is similar to shopping for a home as an investor. While many home valuations are based on intangibles like square footage, the number of rooms and the home’s condition, there are also a lot of intangible factors, such as style, architecture and a certain je ne sais quoi that are more subjective than objective in value.

    If you’re a business looking to acquire another brand in your portfolio and struggling to calculate its valuation, I’ve outlined a few points to help you calculate the value of a brand based on its quantitative and qualitative metrics.

    Related: The Key Metrics in Building a Brand Worth Acquiring

    What are brand value and brand equity?

    Before a merger, it’s vital to differentiate between brand value and brand equity when assessing total value. Brand value is the financial or market value of a brand and all of its assets. On the other hand, brand equity measures consumer sentiment and awareness of a specific brand.

    Differentiating between these two metrics will help you decide how much you are willing to pay for a brand. For example, suppose you were looking to acquire a recently expanded boutique with a dominant presence in the Dallas market. In that case, their market valuation may be lower because it has a high current ratio (e.g., more debt than it could pay off at the present moment). However, if you conducted a customer survey and found that almost all of its customers were satisfied and excited to shop with the brand, you would conclude that its equity is worth more than its current market value.

    Ultimately, calculating brand value and equity will provide a baseline for what you and other competitors would be willing to pay for a brand. In competitive markets, understanding present and future value will help you make a competitive bid that will satisfy both parties involved.

    In addition, calculating brand value can help in several financial aspects, including:

    • Using a brand’s value as collateral for a loan
    • Understanding its tax evaluation
    • Tracking its financial performance
    • Understand areas of weakness the brand can improve in

    With this in mind, let’s explore how to calculate the value of a brand using traditional financial metrics and then quantify the quality of a brand’s equity using some of these same ideas.

    Related: When Acquiring a Company, Don’t Forget About the People

    A quantitative approach to brand value

    To begin with our valuation, we can take a few different approaches to calculate a brand’s financial value.

    • Market valuation: The total value of a brand’s assets, profit margin, capital structure, debt, stock price, or the comparable market value of other brands sold.
    • Income valuation: The estimated value of income that would result from purchasing this asset (i.e rate of return over X years)
    • Cost valuation: The total value of costs required to build a brand to its current valuation (e.g. raw materials consumed, marketing spend, labor costs over time)

    Market valuation is similar to pricing a home, while income valuation would be similar to assessing the total profit of a rental property or passive-income instrument. On the other hand, cost evaluation provides a good estimate of the rate of return of all previous marketing and business efforts to scale a brand to its current value.

    By combining these estimates with qualitative metrics like consumer loyalty, we can gain a good idea of the total value of a brand and whether or not it will be a profitable investment.

    Related: 7 Steps to Prepare Your Company for an Acquisition

    A qualitative approach to brand equity

    While calculating brand equity is mostly subjective, we can get rough scale estimates by assigning value to things like CLV, customer sentiment and brand awareness to quantify the total value of a brand’s equity.

    Here are just a few examples of calculating brand equity in dollar value.

    • Customer lifetime value (CLV): Assign a value to a customer and then multiply this by the number of transactions and their average length of retention. CLV quantifies the long-term value of a brand.
    • Marketing ROI and brand awareness: Assign a value to each customer reached based on CLV and calculate the number of conversions for each impression against the cost spent for those total impressions.
    • Customer sentiment: Conduct customer surveys and invest in social media monitoring tools to assess how satisfied customers are with a brand. To quantify, you can score customers in a survey (0-10) on how willing they are to shop with the brand again, recommend it to friends or family and whether they would spend more or less on future purchases. Then, assign a value to each score to get a rough estimate of the value of total consumer sentiment.

    While customer sentiment and loyalty could be more difficult to evaluate, they also provide a pretty good idea of how much money your most loyal customers provide to a business. Taking a basic Pareto approach, most specialized businesses receive about 80% of their revenue from about 20% of their total customer base.

    Overall, brand equity is more a determinant of long-term brand value than short-term profitability.

    With these metrics in mind, you can create a financial overview of the total value of a business and its brand equity to determine whether its future valuation justifies its current purchasing price.

    While businesses could easily improve a brand’s reputation over time and opt for a lower-priced brand, your business will ultimately benefit more from purchasing a brand with a strong and loyal local presence that requires very little maintenance or costs to keep profitable.

    [ad_2]

    Matt Bertram

    Source link

  • 11 Ways to Make Financial Planning Easier

    11 Ways to Make Financial Planning Easier

    [ad_1]

    Financial planning may be necessary but it’s also notorious for being a decidedly unpleasant experience. For many people, dealing with intimidating life events such as children in college or reaching retirement age, can trigger much emotional or mental stress. Still others may feel overwhelmed as they explore various possible scenarios, challenges, and solutions. 


    Due – Due

    Without doubt, there are a lot of smaller, simpler money tasks you can complete quickly that will help you improve your financial situation to some degree. However, there’s no substitute for a full-fledged, detailed financial plan. 

    To prepare adequately for your future and make the process of financial planning somewhat simpler, follow these 11 tips. Your end result will be a renewed sense of readiness and confidence to face whatever the future may bring for you and your family. 

    1. Make a budget and stick to it

    A budget is simply a financial plan for the present and immediate future. Based on your current and immediately foreseeable circumstances, a budget sets out your expected income and expenses, both fixed and variable. It helps you decide on your spending behavior to ensure you’ll have money available for bills when they come due. 

    To start your budgeting process, first learn about different types of personal budget plans. Choose the one that makes the most sense for you and your current situation. Gather your receipts, bank statements, income records, and bills, then begin marking out expenses against income. You can complete this process with pen and paper, or you can use free online budgeting tools and spreadsheets. 

    Choose the method that will work for you and that you feel most comfortable with. Remember your budget, as part of your financial plan, will need to be revised periodically as changes in your life warrant, such as a new job, a new home, or having children. 

    2. Automate your finances as much as possible

    To keep your financial plan on track, make as many of your money management tasks as automatic as you can. Enroll in direct deposit where possible. You may also want to research banks that offer earlier access to funds on direct deposit. Likewise, look into setting up automatic withdrawals for your recurring bills. This will help you avoid late payment fees and interruptions in critical services. 

    Additionally, take advantage of any automatic savings plans available to you. Both banks and many employers offer individuals the ability to divide up a paycheck between checking, savings, and investment accounts. You may also be able to designate extra change on each purchase (usually by rounding up to the next whole dollar amount) for your savings account. 

    Finally, use the right financial tools to keep track of your budget, your bills, and your investments. Some tools will automatically hunt down potential refunds available to you for past purchases, while others can flag subscription services that aren’t often used so that you can cancel them and save those fees each month. 

    3. Invest in yourself by taking financial courses

    Investing in yourself and your future financial health means improving your financial literacy. Fortunately, you don’t have to spend a fortune to learn more about your money and how to properly manage it to support your goals. Start with free digital resources, such as Due’s library of guides and the many available podcasts  on money management and investment. 

    Many digital classes are also available online, some free and some pay-what-you-can, such as the Khan Academy’s course on personal finance. Others may require more of a financial investment upfront but may pay even greater dividends down the line—for example, if you’re looking for more specialized information on more advanced topics, such as investing in real property or setting up complex trusts. 

    Finally, don’t neglect smaller bits of equally valuable information. These are often found in popular and respected financial literacy and money management newsletters. Look into the archives of publications such as She Spends, The Myth of Money substack, or one of Money’s many newsletters.  

    4. Create savings goals and make a plan to achieve them

    Many people find themselves motivated by the thought of buying something they’ve always wanted or reaching some degree of material comfort. If there’s something you long to buy, to experience, or to achieve, and you need to gather sufficient funds to get there, set a savings goal to help you focus on financial health and building your savings. Then create a step-by-step plan on how you’ll reach that savings goal. For example, you can put a certain percentage of each paycheck aside in your savings account each payday. 

    Figuring out exactly how long it should take you before you can comfortably fund that new purchase or trip will obviously help you stay motivated for that goal. It will also help you feel more comfortable engaging in more in-depth financial planning, too. 

    Sometimes engaging in goal-oriented savings planning eases feelings of anxiety or overwhelm, making the harder work seem a little easier. And when you eventually reach those goals, you’ll realize how effective financial planning and money management are, which can help you get more excited to do some more long-term, complex planning. 

    5. Have an emergency fund to cover unexpected costs

    One of the simplest and most effective ways to make financial planning easier is to set aside sufficient funds to cover unexpected bills and costs. Once you have an emergency fund set aside, or a plan to build one within a few months, you may find yourself feeling more up to the challenge of further deepening your control over your finances. 

    An emergency fund also empowers you to make money decisions from a position of relative strength, instead of being driven by anxiety and fear. It’s always easier to analyze a complex situation clearly when you’re calm and assured that whatever happens, you’ll have the basics covered. 

    6. Make a retirement plan

    Setting up a means to fund your retirement years is probably the most complex aspect of your financial plan. You’ll need to cover a number of unseen potential circumstances. These may include illness, disability, or an unknown length of time for which you’ll need to provide for your expenses. 

    If you don’t currently have a 401(k) or other retirement-savings fund in progress, look into the Roth IRA and other forms of savings and investments to help you build a nest egg for the golden years. When you’re closer to retirement age, you’ll want to choose safer (i.e., less risky) investments and savings vehicles in order to protect yourself from market fluctuations. However, if you’re younger, you can probably shoulder a bit more risk—and potentially earn a bigger reward. 

    7. Invest money wisely

    Creating true wealth—generational wealth—requires you to think more long term about your finances and to take the actions necessary to grow your savings. While paying off extensive debt should usually be a priority, at some point you’ll want to look for smart ways to help your money grow. 

    Start by learning more about the stock market and how to protect your investments in a down market. Consider consulting with a FINRA-registered investment professional to help you get started. However, don’t fall into the trap of letting an investment adviser make all your decisions for you. It’s important to stay educated and engaged in your investments at every step along the way. Let a trusted professional give you guidance, but retain your discretion. 

    8. Stay disciplined with your spending habits

    Maybe you pledge to radically make over your financial habits in the new year. Perhaps you resolve to get your money act together gradually. Either way, there’s no doubt that improving your financial habits and sticking to a disciplined spending and saving plan will go a long way towards maximizing your wealth. 

    “Mystery spending” can really sink your financial plan if you’re not careful. In fact, according to one Visa survey, Americans lose track of $1,000 each year on average. Resolve to eat in more and put a halt to dining out and delivery charges. Invest in clothing that will last for years as opposed to fast fashion that lasts a season or two and goes out of style even more quickly. (It’s bad for the environment, too.) Also consider logging all your purchases for a month to get a fuller picture of your spending habits. You might be surprised at the results. 

    9. Consider using a financial planner

    At some point, you may wonder if you should hire a professional financial planner to help you sort out your money management, savings, and investing concerns. You may be reluctant due to fears about cost, trustworthiness, or the reliability of the advice you receive. Those aren’t irrational concerns, and you should be careful to thoroughly vet anyone you hire to protect your money from unethical or shady advisors. 

    However, the advantages of partnering with an experienced qualified financial planner usually outweigh those concerns and can provide a healthy return on that investment. To maximize their usefulness to you and your financial plan, work to communicate well with your financial planner, and don’t hesitate to make a change if they’re not aligning well with your values and goals. 

    10. Pay off debt as quickly as possible

    It’s tempting to focus on increasing your assets by investing in high-risk, high-reward ventures and stocks. However, what’s actually in your best interest may be paying down your debt more quickly. It’s arguably more boring than the exciting world of investments, but it’s potentially more lucrative, in that it will save you more than you could probably earn on interest. 

    11. Periodically review your financial plan and make changes

    Your financial plan isn’t a one-and-done kind of task, unfortunately. Think of it more as a living document that should be reviewed and updated every so often. Keep your financial plan flexible. As your circumstances change, so should your financial plan. Include your life insurance and other insurance policies in this periodic review. 

    Planning helps preserve your financial health for the future

    It may seem like an overwhelming prospect before you start, but creating your first financial plan doesn’t have to be an all-consuming task. Set a target date in the near future to help you stay motivated. Then commit to taking small steps towards meeting that target date each week. Schedule a half an hour or an hour of work each week to get the job done.

    Engaging in the process, learning more about your financial health and challenges, and implementing solutions to help you conquer those challenges can help you focus on more important aspects of your life and work. And in fact, isn’t that the ultimate goal? A good financial plan will help ensure your finances support your lifestyle and goals both now and in the future. 

    The post 11 Ways to Make Financial Planning Easier appeared first on Due.

    [ad_2]

    John Boitnott

    Source link

  • 2023 Stock Market: Best vs. Worst Case Scenario

    2023 Stock Market: Best vs. Worst Case Scenario

    [ad_1]

    The door is now shut on 2022 and the S&P 500 (SPY) faltered again to put an exclamation point on the bearish year. That is the past. Now let’s discuss the future including the best and worst case scenario for stocks in 2023. 40 year investment veteran Steve Reitmeister weighs in on this timely topic in his new commentary including a trading plan to stay one step ahead of the market. (Maybe even buy TSLA & ROKU on the dip). Read on below for the full story.


    shutterstock.com – StockNews

    Today marks the last session of 2022. And not surprisingly the bears wanted to stake their claim on the session…and on the year by mauling stocks once more.

    Right now, the base case for the start of 2023 is continuation of that downward trend. However, that is far from set in stone.

    Thus, I thought it would be good to use today’s commentary to review things that could alter the path of the markets for better or worse…and our associated trading plan.

    Once again, the best place to understand the base case for next year is in my recent presentation: 2023 Stock Market Outlook.

    In a nut shell I expect a fairly run of the mill recession forming in the first half of 2023 with stock prices falling to a range of 3,000 to 3,200. Note the average bear market has a 34% decline which would equate to 3,180 for the S&P 500 (SPY).

    The reason we might fall further than average is that the previous bull market had overall stock valuations (PE) as high as the 1999 tech bubble. So, some of that excess may need to be drained out before the next bull market can begin.

    Gladly, I also see a new bull market emerging with stocks rising from these lows into year end. That is why my 2023 outlook presentation also concentrates on how to time your way back in at the bottom to enjoy the glorious gains that will unfold as the bull stampedes out of the gate.

    My prediction is kind of middle of the pack with some market prognosticators seeing it milder and some much nastier. And that is what makes investing so complex. It’s hard coming agreement on what the future holds. That clarity is only available in hindsight.

    Now let’s review what would make this a milder bear market. Or what we could call the Best Case Scenario.

    The answer is fairly simply. That being where the Fed amazingly engineers a soft landing with no recession unfolding. This would likely mean that we have already seen bear market bottom in October at 3,491 and stocks would get back on a long term bullish march to new highs in the years ahead.

    There will not be some magical moment that every investor gets the message at the same time. As they say “no one rings a bell at the bottom”.

    Instead, more and more investors will assess the odds that this is a soft landing leading them to shift their investments more bullish. Whereas other investors will come to that realization later likely with a heavy dose of FOMO.

    The better we understand these clues now…the earlier we would join the bull rally to enjoy more upside. Let’s review:

    • The sooner inflation cools down, with special focus on wage inflation, which has been the stickiest area that is concerning the Fed. This means a lot of attention will be paid to the 3 key monthly inflation reports: CPI, PPI and PCE.
    • Employment remains robust and never see unemployment rate get above 4%. This job security makes people feel more confident in spending versus savings keeping the economy humming along.
    • Key economic reports bouncing back from recent weakness. Most vital being ISM Manufacturing and Services getting back above 50 for good. But also many eyes will be on Retails Sales for health of the consumer.
    • Clear pivot in Fed statements to consider ending rate hikes…and maybe get back to lowering rates in the future. Bulls have jumped the gun on this front many times in 2022 only to get a painful wake up call from Chairman Powell. So, this is not about guessing whether the Fed is shifting. Instead, it is hearing an unmistakable change from their current hawkish posture.

    As these things happen, you will first want to start taking profits on bearish bets. From there you start shifting to bullish investments.

    In short, the “Risk On” growth oriented trades that did the worst in 2022 will become the serious outperformers in the early innings of the new bull market.  Technology for sure. Also consider  positions that are economically sensitive; Industrials, Materials, Transportation, Consumer Discretionary etc.

    Now let’s check out the flipside…

    Worst Case Scenario for 2023 Stock Market

    The short and sweet version is to say it would be the opposite of what we would find in the best case scenario.

    Inflation too hot…Fed too hawkish…Job market too weak…Recession too deep…Stock prices decline 40%+

    This outcome fits under the heading that starting a recession is like opening up “Pandora’s Box”. Once those demons are unleashed it is unclear how much damage they can create. This is especially true if employment craters spurring a very negative chain reaction:

    Job Loss > Lower Income > Lower Spending > Lower Corporate Profits > Lower Stock Prices

    And unfortunately, the #1 solution for companies suffering weakened profits is to subsequently lower expenses…like more layoffs. And this is when the vicious cycle goes into a rinse and repeat cycle cutting the economy and stock prices lower and lower.

    The investment game plan here is to hold on to bearish bets longer with S&P 500 (SPY) bottom likely in a lower range of 2,800 to 3,000. Note that 2,800 marks a 42% decline from the all time highs. Hard to imagine heading much lower than that.

    And then just as things are getting their ugliest…that is likely when the new bull market emerges. This fits in nicely with the famed Warren Buffett quote “to be greedy when others are fearful”.

    That is when you flick the switch to the more Risk On growth oriented investments. Gladly their prices will be so depressed that even a value investor could get on board the Tesla’s (TSLA) and Roku’s (ROKU) of the world with a straight face.

    Conclusion

    Any of these outcomes is possible. However, I still think best to first plan for the middle case scenario as outlined in my 2023 Stock Market Outlook.

    Next, we stay vigilant watching for the aforementioned signs that would point to things being better or worse than expected. Then make appropriate changes to your investment strategy.

    I appreciate that this all sounds easier said than done. But this not my first time to the bear market rodeo. In fact, I have weathered 4 previous bear markets in good stead. Each time learning valuable lessons that help with each next edition.

    So please keep dialed into my commentaries going forward to stay on the right side of the action and we will make it safely to the bullish shores that lay ahead.

    What To Do Next?

    Watch my brand new presentation: “2023 Stock Market Outlook” covering:

    • Why 2023 is a “Jekyll & Hyde” year for stocks
    • 5 Warnings Signs the Bear Returns in Early 2023
    • 8 Trades to Profit on the Way Down
    • Plan to Bottom Fish @ Market Bottom
    • 2 Trades with 100%+ Upside Potential as New Bull Emerges
    • And Much More!

    Watch Now: “2023 Stock Market Outlook” > 

    Wishing you a world of investment success!


    Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
    CEO, Stock News Network and Editor, Reitmeister Total Return

    SPY shares were trading at $382.06 per share on Friday afternoon, down $1.38 (-0.36%). Year-to-date, SPY has declined -18.25%, versus a % rise in the benchmark S&P 500 index during the same period.

    About the Author: Steve Reitmeister

    Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

    More…

    The post 2023 Stock Market: Best vs. Worst Case Scenario appeared first on StockNews.com

    [ad_2]

    Steve Reitmeister

    Source link

  • How to Beat the Market in 2023?

    How to Beat the Market in 2023?

    [ad_1]

    Want to discover a stock picking strategy that topped the S&P 500 (SPY) by a wide margin in 2022? Then read on to appreciate this revolutionary that should benefit you greatly in 2023 and beyond. Read on for the full story below.


    shutterstock.com – StockNews

    The bear market of 2022 was a serious wakeup call for investors.

    The harsh reality is that many of the methods that seemed to work so well in previous years…were a downright death sentence as the bear market came out of hibernation.

    First and foremost was the idea of buying “in fashion” growth stocks like Roku and Tesla regardless of nose-bleed valuations. That party came to a very ugly end this past year.

    So, if those things don’t work…then what does?

    That will be the focus of this commentary where I discuss a 3 step evolution in how to select stocks that has led many on a path to superior performance. Hopefully it illumines a strategy that improves your odds of investment success in the new year.

    Stock Picking Method 1.0

    In order to tell you the solution, I first need to point out the problem. And that is the flawed way that most of us research stocks. For that purpose, I will give you an outline on how the average person handles this vital task…then I will point out a better path.

    Let’s say you read an article where some expert is touting 3 stocks they think are terrific. From there we will likely surf your favorite investment websites for additional information which is some combination of the following:

    • What does the company do? (Industry/Sector)
    • Review recent price action
    • Explore a few key metrics on growth, value or company financials
    • Read additional articles that tell us a bit more of the growth story for the company that gives us confident it is an attractive investment going forward.

    So what’s the problem with this approach?

    First, it’s pretty time consuming as you realize this manual method will be applied to every stock under review.

    Second, and most importantly, you are really not covering that much ground. Meaning there are literally thousands of data points that you could investigate for every stock to appreciate how healthy they are…and how they stack up to the competition.

    Yet if we are being honest, this antiquated method only leads to a review of 5-10 aspects of a company before we decide to place a trade. It’s simply not a complete enough review to put the odds in your favor which leads to…

    Stock Picking Method 2.0

    The solution is to automate this approach. Like using computer models to scan more factors of these companies in milliseconds. This is why so many investors have turned to quantitative ratings as a means to find the best stocks.

    In that realm our proprietary POWR Ratings model is helping thousands of investors do exactly that. To scan each stock based upon 118 different factors in a range of areas from growth to value to sentiment to momentum to stability and fundamental strength (quality).

    Why these 118 factors?

    Because the Data Scientist who created the POWR Ratings proved that each of these individual 118 factors leads to stocks more likely to outperform the market. So what we are saying this model gives you 118 advantages to find stocks that should rise above the pack.

    The proof of that statement is clearly verified in the following performance chart where our top rated stocks have outpaced the overall market by a wide margin:

    Yes, I could end the article here. Because using our POWR Ratings will fulfill the promise of this article…to help you find stocks to outperform in the year ahead.

    However, there is still one glaring problem left to solve. That’s because using the above method will still leave you with about 1,300 Buy rated stocks to review. Just too many for the average person to sort in reasonable time frame. That is why we created…

    Stock Picking Method 3.0

    I realized as the CEO of StockNews.com that we needed to go further for clients. To breakdown these 1,300 stocks into a more digestible form so investors can more easily enjoy outperformance.

    This came together in creating an array of market beating newsletters that harness the POWR Ratings for the main styles of stock investing. See the list of newsletters below and the current # of picks in each service to appreciate what I mean:

    Newsletter

    # of Picks in the Portfolio
    POWR Stocks Under $10

    8
    POWR Options

    6
    POWR Growth

    8
    Reitmeister Total Return

    9
    POWR Value

    6
    POWR Breakouts

    8

    Each newsletter portfolio has a very manageable # of picks. And we are just talking about 45 trades in total.

    Plus 3 more trades are on the way for Tuesday morning to kickstart the new year.

    All computed as winners by our proven quant model.

    All hand-picked by our Editors to be the best of the best.

    Here is 1 More Innovation

    Historically we had customers take 30 day trials to each newsletter individually because that is the standard industry practice.

    But what if you are curious in seeing all the services to appreciate which are the best ones for you in the future?

    And that is why we created POWR Platinum. This is a bundle that gives you access to all of our active trading newsletters at one time.

    Not just the 6 newsletters and their 45 trades noted above. POWR Platinum also includes 2 other popular services:

    • POWR Trends– In depth commentaries and top picks from the most exciting growth trends from EV to Space Exploration to Internet of Things to Genomics and more.
    • POWR Ratings Premium – As an extra bonus you also get a subscription to this service giving full access to our coveted POWR Ratings for over 5,300 stocks and 2,000 ETFs. This is the perfect complement to the active trading newsletters making POWR Platinum a complete investment resource.

    There really is something here for every style of investor. Whether you want growth, value, technical analysis, market timing and more.

    $1 for a 30 Day Trial of POWR Platinum

    Yes, only $1 for a 30 day trial to all our market beating services. And while it’s not going to be $1 forever, you’ll be amazed by the low-cost options after the trial concludes.

    I truly believe POWR Platinum with all its market beating services in total is the ultimate investor toolkit and a real game changer for individual investors.

    In fact, I believe so strongly that POWR Platinum has the ability to significantly impact your investing results, and help you outperform the market the rest of the year, that I want to remove all possible barriers so you can experience it first hand and risk-free.

    If you chose to continue after the 30 day trial (and we think you will), I’m offering a 100% money-back guarantee after the trial converts to a paid subscription.

    Put another way, if 30 days doesn’t feel like long enough to make a decision on whether POWR Platinum is the best value investment resource out there, then take up to 90 days longer to decide, at no-risk to you.

    I think the choice is clear.

    Get started with your trial today and start beating the market in the new year!

    Start My No-Risk 30 Day Trial for Just $1 >>

    Wishing you a world of investment success!


    Steve Reitmeister

    …but everyone calls me Reity (pronounced “Righty”)
    CEO, Stock News Network and Editor, Reitmeister Total Return

    SPY shares were trading at $380.35 per share on Friday morning, down $3.09 (-0.81%). Year-to-date, SPY has declined -18.62%, versus a % rise in the benchmark S&P 500 index during the same period.

    About the Author: Steve Reitmeister

    Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

    More…

    The post How to Beat the Market in 2023? appeared first on StockNews.com

    [ad_2]

    Steve Reitmeister

    Source link

  • Mega Millions jackpot hits $685 million

    Mega Millions jackpot hits $685 million

    [ad_1]

    Mega Millions jackpot hits $685 million – CBS News


    Watch CBS News



    Someone could be wrapping up the year with a major bump to their bank account as the Mega Millions jackpot hits $685 million ahead of the Friday drawing.

    Be the first to know

    Get browser notifications for breaking news, live events, and exclusive reporting.


    [ad_2]

    Source link

  • Contribution Margin: What It Is & How To Calculate It

    Contribution Margin: What It Is & How To Calculate It

    [ad_1]

    To run a company successfully, you need to know everything about your business, including its financials. One of the most critical financial metrics to grasp is the contribution margin, which can help you determine how much money you’ll make by selling specific products or services.

    More importantly, your company’s contribution margin can tell you how much profit potential a product has after accounting for specific costs.

    Below is a breakdown of contribution margins in detail, including how to calculate them.

    What is a contribution margin?

    A contribution margin represents the money made by selling a product or unit after subtracting the variable costs to run your business.

    Consider its name — the contribution margin is how much the sale of a particular product or service contributes to your company’s overall profitability. It’s how valuable the sale of a specific product or product line is.

    Related: How to Price Your Staffing Services

    In a contribution margin calculation, you determine the selling price per unit (such as the sales price for a car) and subtract the variable cost per unit or the variable expenses that go into making each product.

    You may need to use the contribution margin formula for your company’s net income statements, net sales or net profit sheets, gross margin, cash flow, and other financial statements or financial ratios.

    What does a contribution margin tell you?

    The contribution margin is one of the critical parts of a break-even analysis. A break-even analysis is a financial calculation weighing costs of production against the unit sell price to determine the break-even point, the point at which total cost and total revenue are equal. Break-even analysis can help you with risk management

    Break-even analyses are useful in determining how much capital you’ll need for a new product and calculating how much risk will be involved in new business activities. They are often used to determine production cost and sales price plans for different products, such as:

    • How much you should price specific products for.
    • How many products you need to sell to turn a profit (the number of units can determine whether you have a low contribution margin or high contribution margin).
    • How much product revenue you will generate.

    The contribution margin further tells you how to separate total fixed cost and profit elements or components from product sales. On top of that, contribution margins help you determine the selling price range for a product or the possible prices at which you can sell that product wisely.

    Other things the unit contribution margin tells you include the following:

    • Profit levels you can expect from the sales of specific products.
    • Sales commission structures you should pay to sales team members.
    • Sales commission structures you should pay to agents or distributors.

    How to calculate a contribution margin

    Luckily, you can calculate a contribution margin with a basic formula:

    C = R – V

    “C” stands for contribution margin. “R” stands for total revenue, and “V” stands for variable costs. With these definitions, the equation goes like this:

    Contribution margin = total revenue – variable costs

    Note that you can also express your contribution margin in terms of a fraction of your business’s total amount of revenue. The contribution margin ratio or CR would then be expressed with the following formula:

    CR = (R – V) / R or contribution margin = (total revenue – variable costs) / total revenue

    Fixed costs vs. variable costs

    Crucial to understanding contribution margin are fixed costs and variable costs.

    Fixed costs are one-time purchases for things like machinery, equipment or business real estate.

    Fixed costs usually stay the same no matter how many units you create or sell. The fixed costs for a contribution margin equation become a smaller percentage of each unit’s cost as you make or sell more of those units.

    Variable costs are the opposite. These can fluctuate from time to time, such as the cost of electricity or certain supplies that depend on supply chain status.

    Contribution margin example

    Imagine that you have a machine that creates new cups, and it costs $20,000. To make a new cup, you have to spend $2 for the raw materials, like ceramics, and electricity to power the machine and labor to make each product.

    If you were to manufacture 100 new cups, your total variable cost would be $200. However, you have to remember that you need the $20,000 machine to make all those cups as well. The machine represents your fixed costs.

    Now imagine that you make those cups to be sold at three dollars per unit. You can now determine the profit per unit by plugging in the above numbers:

    • SP – TC = Profit per unit, where SP is the sales price, and TC is the total cost.
    • $3 – $2 = $1 profit per unit.

    In this example, the profit per unit is the same as the contribution margin. It’s how much each cup sale contributes to “real” profits.

    How can you use contribution margin?

    You can use contribution margin to help you make intelligent business decisions, especially concerning the kinds of products you make and how you price those products.

    A contribution margin analysis can help your company choose from different products that it can use to compete in a specific niche based on available resources and labor.

    Related: Determining Your Break-Even Point

    For instance, you can make a pricier version of a general product if you project that it’ll better use your limited resources given your fixed and variable costs.

    You can also use contribution margin to tell you whether you have priced a product accurately relative to your profit goals.

    For instance, if the contribution margin for a specific product is too low, that could be a sign that you need to either increase the price as you sell the product. It could also indicate that you need to reduce the variable (i.e., manufacturing and supply-related) costs associated with that product to turn more of a profit.

    Contribution margin compared to gross profit margin

    Contribution margins are often compared to gross profit margins, but they differ. Gross profit margin is the difference between your sales revenue and the cost of goods sold.

    When calculating the contribution margin, you only count the variable costs it takes to make a product. Gross profit margin includes all the costs you incur to make a sale, including both the variable costs and the fixed costs, like the cost of machinery or equipment.

    Related: How to Calculate Gross Profit

    Furthermore, a contribution margin tells you how much extra revenue you make by creating additional units after reaching your break-even point.

    Put more simply, a contribution margin tells you how much money every extra sale contributes to your total profits after hitting a specific profitability point.

    This is one reason economies of scale are so popular and effective; at a certain point, even expensive products can become profitable if you make and sell enough.

    When should you use contribution margin?

    Generally, you should use contribution margin to tell you:

    • If you have priced a product incorrectly.
    • How many products you need to sell to make a profit based on variable costs.
    • Whether you need to reduce operating or labor expenses related to making a product.

    A negative contribution margin tends to indicate negative performance for a product or service, while a positive contribution margin indicates the inverse.

    However, it may be best to avoid using a contribution margin by itself, particularly if you want to evaluate the financial health of your entire operation. Instead, consider using contribution margin as an element in a comprehensive financial analysis.

    Use contribution margin alongside gross profit margin, your balance sheet, and other financial metrics and analyses. This is the only real way to determine whether your company is profitable in the short and long term and if you need to make widespread changes to your profit models.

    Related: Understanding the Difference between Gross Margin and Markup

    You may also use contribution margin as an investor. Investors and analysts use contribution margins for a company’s staple or primary products.

    They can use that information to determine whether the company prices its products accurately or is likely to turn a profit without looking at that company’s balance sheet or other financial information.

    For instance, if a company has a low contribution margin for its essential products, it could be spending more money than it is bringing in.

    Conversely, a good contribution margin may indicate that the company is an excellent operation and uses its resources wisely.

    Related: The 5 Myths of Mastering Profit Margins

    So, what are the takeaways about contribution margins?

    As you can see, contribution margin is an important metric to calculate and keep in mind when determining whether to make or provide a specific product or service.

    Once you calculate your contribution margin, you can determine whether one product or another is ultimately better for your bottom line. Still, of course, this is just one of the critical financial metrics you need to master as a business owner.

    Interested in more resources like this? Check out Entrepreneur’s vast and ever-growing library of guides and resources to help you on your path to professional success.

    [ad_2]

    Entrepreneur Staff

    Source link

  • What is Revenue: Definition, How to Calculate It & More

    What is Revenue: Definition, How to Calculate It & More

    [ad_1]

    Businesses are primarily successful based on how much money they make or their revenue. But while anyone can roughly grasp revenue, what it means and why it’s essential, revenue as a business figure is a little more complex, especially when you compare it to other metrics like income.

    Below is a breakdown of revenue in detail and how to calculate revenue using a revenue formula.

    Related: Tracking These 6 Metrics Could Boost Your Sales

    Revenue explained

    Revenue is the money a business generates from its normal business operations, things like gross sales of products and other income streams. It is calculated by looking at the average product sales price and multiplying it by the number of units sold.

    For example, a car dealership’s revenue is the combined sales price for all cars it sells in a given timeframe, like a day, week, month or quarter. Total revenue is the “top line” for gross income metric on a balance sheet or company income statement.

    While revenue is an essential metric, it is distinct from other key metrics such as operating income, gross revenue and total profits. The net profit, for example, is the amount of money you get to keep or count as profits based on the sale of goods.

    Types of revenue

    You can calculate and analyze different types of revenue for your business purposes or for calculating other ratios.

    Related: How to Forecast Revenue and Growth

    Generally, corporate revenue is subdivided according to the divisions or products that make that revenue. For instance, if you have a restaurant, you might divide and analyze your revenue by categorizing your offerings as sides, main dishes and alcoholic beverages.

    Alternatively, a company can distinguish revenue by analyzing cash flow from tangible or intangible products or services. Tangible products are products you can feel and physically sell to customers, while intangible products are usually services, such as internet and cloud services.

    You can further divide your revenue into operating revenue and non-operating revenue. Operating revenue is any revenue from a company’s core business. For instance, if you run a restaurant, your operating revenue is from the food and drinks you sell to customers.

    Nonoperating revenue is any revenue from secondary income sources. If you run a restaurant, your nonoperating revenue could be from sales of loyalty program cards, gift cards or restaurant merchandise, like T-shirts and mugs.

    Nonoperating revenue is critical to incorporate because it can be unpredictable and nonrecurring. You might, for instance, get money through a litigation victory or selling an asset.

    In any case, it’s essential to divide your revenue by source and type to understand where most of your money comes from and make smarter business decisions.

    Revenue vs. Income

    Revenue is distinct from income, even though the two concepts are very similar. At its core, the revenue is all the money you make from your products and services.

    But income is the money you “take home” or have left over after subtracting the necessary expenses to make those products and services.

    This includes the cost of goods and other operating expenses, which get taken out of your revenue. In this sense, income is closer to your gross profits than revenue taken by itself.

    Example of revenue

    Here’s an example:

    • Say you create handmade jewelry for your online store or a platform like Etsy.
    • You have to spend $100 on materials for a single set of earrings.
    • When the earrings are complete, you can sell them for $150. Should you sell the pair of earrings, you’ll make a profit of $50.

    In this sense, your revenue is $150, but your income is only $50. Understanding these distinctions can help you grasp your finances more accurately and responsibly.

    Note that even though income is vital to calculate, it needs to consider the time or cost of labor that is not accounted for in salaries.

    Again, say you run your own business and don’t employ anyone. While you can calculate income by subtracting the material expenses you have, you won’t be able to tally up the cost of your labor unless you pay yourself a salary.

    Why and when is revenue important?

    Revenue is essential because it helps a company understand how much money has been brought in over the last quarter, month or timeframe.

    Businesses can’t make wise decisions regarding employee salaries, product purchasing and other expenses without knowing how much money flows into their coffers.

    Revenue is the top-line income metric because it appears first on any corporate income statement. When you hear “top-line growth,” you can translate it in your head to “revenue growth.”

    It’s contrasted with net income, also called the bottom line income metric. Income, as mentioned above, is a company’s revenues minus expenses.

    Contrasting these two numbers can help companies understand how much money they spent to earn their profits. It’s one of the central accounting principles that should guide your business activities.

    While revenue is significant, it cannot and should not be considered in isolation. Instead, you should look at revenue in conjunction with other metrics so you can understand the total financial health of your business relative to other organizations or your business goals.

    For example, if you have high revenue, such as $1 million per quarter, you might think that you are earning a lot of money.

    But when you compare your revenue to your net income, which is just $20,000 per quarter, you’ll notice that you aren’t taking home a lot of money relative to your expenses or the costs of doing business.

    Armed with information about revenue vs. profit, you can then make decisions such as:

    • Decreasing your expenses in some way.
    • Offering new products or changing the way you price your products.

    Revenue, along with profit margin, is an integral part of forecasting, fundraising from investors and accrual accounting, all of which consider a company’s financial health.

    How can companies increase revenue?

    Companies can increase revenue in a variety of ways. For example, a company can try to reduce its operating expenses by laying off employees, finding better supply chain arrangements or streamlining or simplifying the manufacturing process to make producing each business unit cost less.

    Related: Finding New Ways to Generate Revenue

    Alternatively, companies can increase revenue by increasing the cost of each unit sold. They may increase prices by a certain amount to bring in more money.

    This tactic, while risky, can be successful if a company’s target audience members are willing to spend more money on the same products for one reason or another.

    How to calculate revenue

    You need to know how to calculate revenue if you are to analyze it properly.

    Fortunately, you can use a simple revenue calculation formula to get this metric, no matter how many things you have sold or how much money you have made.

    Note that this revenue formula is helpful and generalized, but service companies, production companies, and other corporations may use different formulas.

    An excellent basic revenue formula to use is:

    Net revenue = (quantity sold X unit price) – discounts – allowances – returns

    Here’s a more detailed breakdown of this formula: net revenue is what you are trying to find.

    The discounts are any discounted prices you have to account for, such as when selling products on sale.

    Allowances are other monetary benefits afforded to customers, such as store credit. Returns are subtractions to your revenue because you give back money to a customer.

    To complete this formula, you first multiply the units sold by the unit price for each unit. Say that you are trying to find the revenue for selling a batch of glasses from your business.

    You sell each glass for $50, and you sell 75 glasses in total. You end up with a revenue of $3750.

    However, you need to subtract any discounts, allowances, or returns that may have impacted that revenue number.

    Say that one of your customers returned 10 of the glasses because they ended up needing fewer. You have to subtract $500 from that total, resulting in a new total of $3250. Remember, this is just your revenue, not your income or profits.

    Essentially, you can always calculate revenue by calculating how much money you made, then subtracting any expenses, discounts or other elements that might reduce how much money you take home or put in the bank.

    When should you calculate revenue?

    You or your accountant should calculate revenue at the end of each quarter at the bare minimum. Revenue is a crucial element of any balance sheet, which collects essential metrics and shows you your company’s financial health.

    However, you can calculate revenue whenever you need to understand the relationship between the money you bring in and the money you spend to make that profit.

    Calculate revenue when you want to learn:

    • Whether you need to increase the prices of your services or products.
    • Whether you should decrease or increase your labor salaries or lay people off.
    • Whether you should reduce the prices of your products to drive sales.
    • Whether you need to take other, more drastic measures to improve the profitability of your company.

    If you have an accountant, they may calculate the revenue for you automatically or regularly. However, it may be wise to calculate revenue regularly.

    Since it’s only accurate for a short period, regularly calculating revenue could help you see how your company evolves or see what “good” revenue looks like compared to “bad.”

    Summary

    Revenue is just one part of a company’s overall balance sheet. While important, remember to be careful about calculating revenue in isolation; instead, consider analyzing it in conjunction with other metrics such as income, gross profits and expenses.

    Running a business and understanding your finances is an ever-evolving, ongoing process.

    Looking for more professional finance articles like this one? Explore Entrepreneur’s Money & Finance resources here.

    [ad_2]

    Entrepreneur Staff

    Source link

  • 2 Stocks You Can Buy This Week for Less Than $50

    2 Stocks You Can Buy This Week for Less Than $50

    [ad_1]

    Recessionary fears continue to weigh on investors’ sentiment as inflation is still soaring high, and the Fed is likely to continue with its aggressive interest rate hikes. With prospects of a mild recession next year, it could be wise to invest in fundamentally strong stocks Comcast Corp. (CMCSA) and Albertsons Companies (ACI). These stocks are currently trading under $50. Read on….


    shutterstock.com – StockNews

    Concerns over a volatile market, stubbornly high inflation, and aggressive rate hikes from the Federal Reserve have weighed on investors’ sentiments. It’s been a painful year for stocks as all the major averages march toward their worst year since 2008.

    Although inflation eased for the second consecutive month in November, it still remains at elevated levels. With the Federal Reserve still trying to curb inflation, and market experts expecting a recession or a slight slowdown, 2023 doesn’t promise much change. CFRA Chief Investment Strategist Sam Stovall expects a challenging first half of the year as the economy likely succumbs to a “long anticipated, but mild, recession.”

    This is expected to keep the stock market under pressure. However, it could be one of the best times to invest in quality stocks. To paraphrase Warren Buffett, “the key is to buy great companies at a fair price rather than fair companies at great prices.”

    Thus, it could be wise to invest in quality stocks Comcast Corporation (CMCSA) and Albertsons Companies, Inc. (ACI), which are trading under $50. These stocks possess strong fundamentals and solid growth prospects.

    Comcast Corporation (CMCSA)

    CMCSA is a global media and technology company operating through five segments: Cable Communications; Media, Studios; Theme Parks; and Sky.

    On December 12, CMCSA launched the world’s first live, multigigabit symmetrical Internet connection powered by 10G and Full Duplex DOCSIS 4.0. 10G technology. This technology promises to offer customers next-level net speed and performance and is expected to boost CMCSA’s product portfolio significantly.

    The same day, the company announced that it had exceeded its goal of launching 1,250 Lift Zones in 2022. The Lift Zones program provides free WiFi access in neighborhood community centers nationwide.

    For the fiscal third quarter that ended September 30, 2022, CMCSA’s adjusted net income increased 4.5% from the prior-year quarter to $4.22 billion. The company’s adjusted EBITDA increased 5.9% from the year-ago value to $9.48 billion, while its adjusted EPS increased 10.3% year-over-year to $0.96.

    CMCSA’s EPS and revenue are expected to increase 2.8% and 0.3% year-over-year to $0.79 and $30.44 billion, respectively, in the fiscal fourth quarter (ending December 31, 2022). The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.

    Shares of CMCSA have gained 15.2% over the past three months to close the last trading session at $35.05.

    CMCSA’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

    It has a B grade for Quality. Of the nine stocks in the Entertainment – TV & Internet Providers industry, it is ranked first. To see the other ratings of CMCSA for Growth, Value, Momentum, Stability, and Sentiment, click here.

    Albertsons Companies, Inc. (ACI)

    ACI is engaged in the operation of food and drug stores in the United States. It offers grocery, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services.

    On October 14, Kroger Co. (KR) and ACI announced a definitive merger agreement to establish a national footprint and unite around Kroger’s Purpose to Feed the Human Spirit. The companies intend to invest $1 billion to continue raising associate wages and benefits and enhance customer experience. On top of it, ACI will pay a special cash dividend of up to $4 billion to its shareholders.

    Chan Galbato, Co-Chair of the ACI board of directors, said, “This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans.”

    ACI’s net sales and other revenue increased 8.6% year-over-year to $17.92 billion in the fiscal second quarter ended September 10, 2022. Its gross margin grew 6.1% from the year-ago value to $5 billion, while its operating income was up 9.3% year-over-year to $531 million.

    The company’s adjusted net income came in at $418.30 million, representing an increase of 13.2% year-over-year. Also, its adjusted net income per share rose 12.5% year-over-year to $0.72. In addition, the ACI’s adjusted EBITDA increased 8.6% from the prior-year value to $1.05 billion.

    Analysts expect ACI’s revenue for the quarter ended November 30, 2022, to increase 5.3% year-over-year to $17.61 billion. Its EPS is expected to increase by 8% per annum over the next five years. It has surpassed the consensus EPS estimates in each of the trailing four quarters.

    The stock has gained 10.5% over the past three months to close the last trading session at $20.98.

    ACI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Sentiment and Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #6 out of 39 stocks.

    In addition to the POWR Rating grades I have highlighted, you can check the other ratings of ACI for Growth, Momentum, and Stability here.

    CMCSA shares were trading at $34.79 per share on Friday morning, down $0.26 (-0.74%). Year-to-date, CMCSA has declined -29.05%, versus a -18.62% rise in the benchmark S&P 500 index during the same period.

    About the Author: Shweta Kumari

    Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

    More…

    The post 2 Stocks You Can Buy This Week for Less Than $50 appeared first on StockNews.com

    [ad_2]

    Shweta Kumari

    Source link

  • 1 Tech Stock You Can Always Buy and Hold

    1 Tech Stock You Can Always Buy and Hold

    [ad_1]

    Despite the macroeconomic headwinds hitting the technology sector hard this year, Microsoft (MSFT) delivered improved financials. The company’s long dividend-paying history and consistent growth make the stock a must addition to one’s portfolio. Read on….


    shutterstock.com – StockNews

    Tech giant Microsoft Corporation (MSFT) continues to invest in strategic growth initiatives. Last month, a collaboration with chip juggernaut NVIDIA Corporation (NVDA) was announced, aimed at developing a ‘massive’ computer that can handle artificial intelligence computing work in the cloud.

    MSFT’s solid financials help the company consistently reward shareholders through dividends. The company declared a quarterly dividend of $0.68 per share on November 29, payable to shareholders on March 9, 2023. Its annual dividend of $2.72 yields 1.13% at the current price level.

    The company’s dividend payouts have increased at a 10.4% CAGR over the past three years and a 9.8% CAGR over the past five years. MSFT has a record of 18 years of consecutive dividend growth.

    The company surpassed consensus EPS estimates in three of the trailing four quarters. Moreover, analysts expect MSFT’s EPS to grow 13% per annum over the next five years.

    Although the stock has declined 6.4% over the past six months, it has gained marginally over the past month and the past five days to close its last trading session at $241.01. It is trading higher than its 50-day moving average of $240.80.

    Here are the factors that could influence MSFT’s performance in the near term:

    Solid Financials

    For the fiscal first quarter ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion. Gross margin rose 9.5% from the prior-year quarter to $34.67 billion. Operating income improved 6.3% year-over-year to $21.52 billion. Net income and EPS came in at $17.56 billion and $2.35, respectively.

    Robust Profitability

    MSFT’s trailing-12-month EBIT margin and net income margin of 41.69% and 34.37% are 529.6% and 958.8% higher than the industry averages of 6.62% and 3.25%, respectively.

    The stock’s trailing-12-month ROCE, ROTC, and ROTA of 42.88%, 21.97%, and 19.40% are 757.1%, 577.9%, and 1,176.5% higher than their respective industry averages of 5%, 3.24%, and 1.52%.

    Strong Growth History

    MSFT’s revenue grew at a 16.1% CAGR over the past three years and a 15.4% CAGR over the past five years. Its EBIT and net income grew at 22.8% and 19.3% CAGRs over the past three years. Its EPS increased at a 20.6% CAGR over the same period.

    Favorable Wall Street Sentiment

    In the last three months, 27 Wall Street analysts rated MSFT. Of them, 25 rated the stock a Buy, while two gave it a Hold rating. The 12-month median price target of $291.34 indicates a 20.9% potential upside. The price targets range from a low of $234 to a high of $371.

    POWR Ratings Reflect Promising Prospects

    MSFT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

    Our proprietary rating system also evaluates each stock based on eight distinct categories. MSFT has a B grade for Sentiment and Quality, consistent with favorable analyst sentiment and higher-than-industry profitability. It has a Stability grade of B, in sync with its five-year beta of 0.93.

    In the 53-stock Software – Business industry, it is ranked #9.

    Click here to see the additional POWR Ratings for MSFT (Growth, Value, and Momentum).

    View all the top stocks in the Software – Business industry here.

    Bottom Line

    MSFT has been investors’ darling for a long time, and the company is taking up strategic growth initiatives. Also, MSFT’s steady dividend growth record looks promising. As Wall Street analysts expect a more than 20% upside in its stock, MSFT might be a solid buy now.

    How Does Microsoft Corporation (MSFT) Stack up Against Its Peers?

    While MSFT has an overall POWR Rating of B, one might consider looking at its industry peers, Yext, Inc. (YEXT), which has an overall A (Strong Buy) rating.

    MSFT shares were trading at $237.67 per share on Friday morning, down $3.34 (-1.39%). Year-to-date, MSFT has declined -28.67%, versus a -18.68% rise in the benchmark S&P 500 index during the same period.

    About the Author: Anushka Dutta

    Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

    More…

    The post 1 Tech Stock You Can Always Buy and Hold appeared first on StockNews.com

    [ad_2]

    Anushka Dutta

    Source link

  • Looking to Refinance Once Rates Lower, Here is How to Prepare

    Looking to Refinance Once Rates Lower, Here is How to Prepare

    [ad_1]

    Many homeowners are not interested in refinancing because of high-interest rates.


    Due – Due

    However, if you can reduce your current interest rate by at least 0.75 percentage points, refinancing tends to make sense. Let’s say that your average interest rate on your current mortgage currently is 3.3%. Considering current mortgage rates are almost double this figure, refinancing really isn’t a smart financial option.

    Nonetheless, there are still some situations in which a refinance is the best option.

    Over the past two years, homeowners have gained a large amount of equity. By refinancing with cash-out, the homeowner can access the equity and pay down higher-interest debt. Consider home equity loans and home equity lines of credit as other options for accessing home equity, so you can see what suits you best.

    Homeowners who are nearing the end of their adjustable-rate loan’s fixed-rate period may also benefit from a refinance, even at today’s higher rates. When you switch to a fixed-rate loan, your monthly payments will remain steady and you won’t have to worry about periodic increases.

    If a refinance sounds like the right move for you now but you aren’t sure where to start, following these steps can set you on the right path.

    Another reason? Rates might lower. And, it appears we’re headed that way.

    “If recent trends continue with respect to consistent declines in inflation amidst an increasing risk of recession, we may be near the peak rate for this cycle, now expected to be just over 5 percent,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

    So, if you are looking to refinance once rates lower, here’s how you can prepare.

    Determine a refinancing goal.

    If you are considering a refinance, you should determine why you are doing so. Specifically, if you’re refinancing, there should be a good reason why. It is possible, for example, to save money by getting a lower interest rate and a lower monthly payment.

    As an alternative, you can refinance your mortgage if you’re comfortable making the same or higher payments. You can also use refinancing to consolidate your debts or to withdraw some equity to pay for repairs or emergency expenses.

    When refinancing, it’s important to pinpoint what you’d like to achieve so that you don’t end up with the wrong loan. After all, each loan type offers different benefits.

    If you want to guarantee a lower rate permanently, you may want to switch to a fixed-rate mortgage. Or, to pay off your mortgage faster, you may prefer a 15-year loan over a 30-year loan. And, it may also be possible to save on mortgage insurance if you switch from an FHA loan to a conventional mortgage if you have enough equity.

    Have you recently been hit with major medical bills, unexpected home repairs, or other expenses that have strained your finances? With a cash-out refi, you can refinance your mortgage and take out more cash at the same time if you’ve built up enough equity.

    Overall, in order to determine what type of mortgage product is right for you, you must determine what you want to accomplish with a refi. And, always see which option works best for you by weighing all the options.

    Put your math skills to the test.

    When you’ve determined your reason for refinancing, choose a loan that will enable you to reach your goal. Again, you may be better off refinancing if you want to reduce your monthly payment, pay your loan off faster, or save on interest. In contrast, if you want to take cash out or consolidate your debt, a cash-out refinance may be right for you.

    Aside from the refinancing type, you should also consider the type of loan (adjustable-rate or fixed-rate mortgage), the term (length), and whether you want to offset closing costs or pay points to lower your rate.

    Just like when you take out a mortgage loan, you must pay closing costs before your refinance is finalized. Refinance closing costs usually range from 3% – 6% of the loan amount. Your closing costs will, however, vary depending on where you live. Prior to applying for a refinance, make sure you can afford these costs, or ask your lender to roll them into your refinance loan.

    In addition to closing costs, you may see the following fees:

    • Application fee. When you request a refinance, your lender may charge you an application fee. In order to refinance your loan, you’ll have to pay this fee, regardless of whether you are approved.
    • Appraisal fee. In most cases, your lender will require an appraisal before you can refinance. An appraisal assures the lender that your home’s value has not decreased since you bought it. And it also ensures that you don’t borrow more money than you can afford..
    • Inspection fee. Before you close on a refinance, some states require a special inspection (like a pest inspection). In addition, certain types of government loans require an inspection.
    • Attorney review and closing fee. Refinance documents may need to be reviewed by an attorney before closing in some states. You’ll have to pay the fees of your real estate attorney if you hire one.
    • Title search and insurance. Refinancing with a new lender that didn’t service your old loan may require another title search. A title insurance policy may also be required, which protects both you and your lender against other claims.

    Identifying your break-even point will help you determine whether a refi is worthwhile. This is the period of time required for the savings to surpass the cost of the new loan. Break-even points can be calculated by multiplying the monthly savings by the loan closing costs.

    Your break-even point, for example, would be after 50 months, or about 4 years if your closing costs are $5,000 and your monthly savings are $100. For homeowners who plan to stay in their homes longer than four years, refinancing may be a good idea.

    With a mortgage refinance calculator, you can determine whether it’s right to refinance.

    Keep an eye on rate reports.

    Keep an eye on news reports about rate cuts and mortgage applications in order to be ahead of the game the next time rates drop. In the event of further drops, you may want to make your loan application sooner rather than later.

    Some sources with following include Freddie Mac, the Federal Housing Finance Agency, and Bankrate.

    You can always ask your lender whether it’s a good time to lock. Have them walk you through various scenarios to determine whether they think rates are likely to go lower. And, it wouldn’t hurt to ask questions like:

    • “By locking now, what do I gain?”
    • “Do I have a chance of benefiting from refinancing in the future?”

    Take a look at your credit history and score.

    As with your original home loan, you must qualify for a refinance. A higher credit score will result in better refinance rates from lenders — and a greater chance of approval from underwriters.

    Generally, for a conventional refinance, you’ll need a credit score of 620 or higher. But, in some cases, you can refinance with an FHA or VA mortgage with a credit score of 580. Borrowing amounts will be limited, though.

    Before refinancing your mortgage with bad credit, spend a few months improving your credit score, if you can. For instance, while you’re waiting to refinance, try paying down some existing debt if your credit score isn’t good-to-excellent. In addition to raising your score, you’ll lower your debt-to-income ratio, too.

    A lender also wants a good score and a clean credit history. And, they want to know if you can pay them back.

    When it comes to cash-out refinances, though, DTI (debt-to-income) is key. The reason? You’re asking for a much larger loan, so you’ll have higher monthly payments. Having a lower DTI makes you look less risky.

    While you wait to take advantage of the next interest rate drop, keeping your DTI low is a key factor for any refinance loan. Therefore, staying vigilant is the most effective way to prepare for the next rate decline. Keep track of your credit score and watch for rate drops. And talk to your lender too.

    Do a home equity check.

    The equity in your home is the value of your home minus what you owe on it. You can figure it out by checking your mortgage statement. You can then check online home search sites or talk to a realtor to see what your house is worth, such as Zillow’s home price estimate. Your home equity is what’s left over.

    Say you still owe $250,000 on your house, but it’s worth $325,000. In this case, your home equity is $75,000.

    It’s possible to refinance conventional loans with just 5% equity. But if you have at least 20% equity, you’ll get better rates and fewer fees. Even better? You won’t have to pay private mortgage insurance either.

    Simply put, the more equity you have in your house, the safer the loan.

    Shop multiple mortgage lenders.

    You can save thousands of dollars by getting quotes from three or more lenders. To avoid high rates before your loan closes, discuss what is the right time to lock in your rate once you’ve selected a lender.

    Aside from comparing interest rates, consider the fees associated with your new mortgage and whether they will be due upfront or included in the loan. There are times when lenders offer no-closing-cost refinances. In exchange, they charge higher interest rates or increase loan balances.

    Gather your paperwork.

    In most cases, refinancing your home requires similar paperwork as the original mortgage loan. Even before your lender asks for them, you might want to gather all of the necessary financial documents so the process runs quickly and smoothly.

    Typically, you’ll need to provide:

    • Personal tax returns for the past two years
    • Business tax returns for the past two years — if you own more than 25% of a business
    • W-2s or 1099s for the past two years
    • Bank statements for the past two months
    • Payment proof for alimony or child support

    In the case of most online applications, you will be able to link your bank accounts and upload your documents electronically. As soon as your initial application is reviewed by the lender’s underwriting team, you will be notified of what follow-up documents are required.

    Prep your home for the appraisal.

    To determine your home’s market value, your refinance lender will also request a home appraisal. Appraisals are important because they determine how much equity you have in your home.

    As already mentioned, lenders will offer better rates if your home equity is high. Whether you can take cash out of your home if you pursue a cash-out refinance depends on how much equity you have.

    When determining your home’s value, an appraiser takes several factors into account, such as its size and features, as well as its condition. Making some general improvements to your home to ensure it is in peak condition is not difficult — even if it’s not feasible to double its square footage before refinancing.

    What is the most important way to make the most of your appraisal? Ensure your home complies with health and safety regulations, such as smoke and carbon dioxide detectors. This can result in extra fees, delays, or even ineligibility for the loan if you do not address these issues beforehand.

    You’ll also want to spruce up the exterior of your home. Make sure your lawn is mowed, your garden is in order, and your children’s toys are tucked away before the big day.

    Prepare your home as if it is about to be sold by staging it. You should repair broken windows, and holes in the wall, and eliminate any clutter in the home. You can boost the value of your house with even the smallest changes.

    To help the appraiser compare your home with other similar properties, you may want to itemize any upgrades you have made. Furthermore, letting the lender or appraiser know about any significant improvements you’ve made since buying your house could result in a higher appraisal.

    Get back to lenders as soon as possible.

    You won’t know exactly how long it will take until you refinance. However, you can usually expect it to take 30 – 45 days. As such, be sure to respond to any inquiries from your lender as soon as possible so that your refinance goes without a hitch.

    Remember, in the underwriting process, your lender might ask for more documentation about your credit, work, or finances. If the lender requests these documents, you should send them within a few days, and include your contact information in case they have further questions.

    The lender will also send you a Closing Disclosure after they have reviewed your appraisal and underwritten your loan. You will find information about your closing costs, interest rate, and the final terms of your loan in your Closing Disclosure. It is your lender’s responsibility to give you at least three days to review your Disclosure after you have received it. Once you receive your Closing Disclosure, acknowledge receipt as soon as possible.

    Lock in your rate.

    The moment you’ve found a lender with the best terms and rate, lock it in. By locking in your interest rate, you’ll ensure that your rate won’t increase before you close.

    In general, rate locks last between 15 and 60 days. With lenders taking a long time to close these days, you may want to consider locking in for a longer period of time. Rate locks may not be charged by all lenders, but some do. You can expect to pay 0.25% to 0.50% of your total loan amount in rate lock fees. You may also need to pay additional fees if your loan doesn’t close on time.

    Timing is everything when it comes to a rate lock. To lock the rate for a certain period of time, consult your lender about how long they typically take to close.

    Come to the closing with cash, if needed.

    During the closing process, closing costs will be included in the closing disclosure, as well as the loan estimate. At closing, you may have to pay 3 to 5 percent of the total loan amount.

    As a result, you might be able to finance the costs, which can run into a few thousand dollars, amortizing them over time. However, you’ll pay a higher interest rate or total loan amount for it, which amounts to more interest over time. You’ll probably be charged a fee for doing it, too.

    In short, if you can afford to pay upfront, it makes more financial sense to do so.

    Keep tabs on your loan.

    Ensure you stay up-to-date on your mortgage by keeping copies of your closing paperwork in a safe place. Also, to keep up with your current mortgage payments, set up automatic payments. In fact, some banks offer lower rates if you enroll in autopay.

    Upon closing or many years later, your lender or servicer may resell your loan on the secondary market. In that case, you’ll owe mortgage payments to a different company, so watch for mail notifying you of the change. Nevertheless, the terms themselves should remain the same.

    FAQs

    1. Is refinancing a smart idea?

    To answer this question, keep your goals in mind. If you wish to access your equity, reduce your monthly payment, receive a lower interest rate, or repay your loan sooner, refinancing your home might be a wise choice.

    2. Does refinancing always save money?

    Sometimes, no.

    When interest rates are higher than your current mortgage rate, refinancing may be more expensive than your original mortgage. Examine your current loan and refinance it to a mortgage that is in line with your budget.

    3. How does refinancing affect my credit score?

    When you refinance, the credit bureaus pull your full credit report and deduct points from your credit score. As such, refinancing may temporarily hurt your score. But it could eventually help. It usually takes 1 year for hard inquiries to show up on your credit report.

    When you’re shopping for rates, make sure all lenders submit their inquiries within the same timeframe. A credit bureau will treat several inquiries as one if they’re within 14 to 45 days. You’re more likely to see your score drop if you have multiple hard inquiries.

    4. What’s the difference between a rate-and-term refinance and a cash-out refinance?

    Rate-and-term refinancing is when you change your interest rate, term, or switch from an adjustable-rate mortgage to a fixed-rate mortgage.

    With a rate-and-term refinance, you pay off one loan with the proceeds of the new one. By doing this you can lower your interest rate or shorten the term of your mortgage to build equity faster.

    You get more cash than you need to pay off your existing mortgage, closing costs, points, and liens compared to a cash-out refinance. You can spend the cash however you want. Your home usually needs to have more than 20 percent equity to be eligible for cash-out refinancing.

    5. Is it necessary to have an attorney to refinance?

    When refinancing a mortgage, some states require borrowers to have a lawyer review documents. If you live in a state where refinancing isn’t required, you might want to hire a real estate lawyer to protect your interests.

    The post Looking to Refinance Once Rates Lower, Here is How to Prepare appeared first on Due.

    [ad_2]

    Deanna Ritchie

    Source link

  • What Is a Balance Sheet and Why Does Your Business Need One?

    What Is a Balance Sheet and Why Does Your Business Need One?

    [ad_1]

    When you want to know a company’s financial health, it helps to look at its balance sheet. But if you’ve never seen a balance sheet before or don’t know how to read one, all you’ll see is a collection of impenetrable numbers and strange terms.

    You’ve likely heard about line items and balance-sheet-related terms like working capital, net income, net assets or bonds payable; however, without a cursory understanding of how balance sheets work, these terms can confuse you.

    This article will solve that by breaking down balance sheets in detail, explaining what a balance sheet is, and how it works, as well as showing you some balance sheet examples.

    Related: Balance Sheet – The Entrepreneur Small Business Encyclopedia

    What is a balance sheet?

    A balance sheet is a detailed financial statement that breaks down all of a company’s assets, liabilities, and equity at a specific time, such as the end of a month, the end of a quarter or the end of a year.

    You can also make balance sheets for “random” points in time to see how a company is doing at any given moment. No matter when you make one, a balance sheet allows you to evaluate a business’s capital structure and determine how profitable it is relative to its expenses.

    Think of a balance sheet as a snapshot exploring what a company owns and owes and how much shareholders invest.

    Balance sheets, combined with other financial statements, allow investors and business owners to analyze business performance and make the wisest decisions possible.

    Related: Financial Statement – The Entrepreneur Small Business Encyclopedia

    What are the major components of a balance sheet?

    All balance sheets are comprised of three primary sections — here’s a detailed breakdown of each:

    Assets

    First, you’ll find a breakdown of the company’s assets. The assets are everything that a company owns that has a dollar value. More specifically, a company can turn assets into cash at some point.

    Current assets can impact a company’s financial position and can include the following:

    • Money in business checking accounts.
    • Physical products and equipment, such as inventory.
    • Prepaid expenses.
    • Short-term investments.
    • Money in transit, like money from invoices.
    • Accounts receivable, which is any money owed to a business by its customers.
    • Cash equivalents, like stocks, bonds, marketable securities, and foreign currencies.

    However, this is by no means a comprehensive list of all total assets, which would also include non-current assets (long-term investments) that a company does not expect to liquify within a given fiscal year.

    Additionally, assets can be tangible things, such as business buildings or equipment.

    Intangible assets include things like intellectual property, copyrights and trademarks. Note that tangible assets are usually subject to depreciation, so they lose value over time.

    Assets may be further broken down into both long-term and short-term assets. You can sell short-term assets relatively quickly, typically in less than a year.

    They include the majority of the assets described above. Long-term assets are things like buildings, land, corporate machinery and equipment.

    Liabilities

    Next on a balance sheet should be liabilities. Liabilities are any of the financial debts or obligations that a company has. Liabilities should be listed by the due date, with the debts or liabilities that are due the soonest listed on top.

    Total liabilities can include but are not limited to:

    • Taxes owed, including upcoming tax liabilities.
    • Accounts payable or money owed to suppliers for items purchased on credit.
    • Employee wages for hours already worked.
    • Loans you must pay back within a year.
    • Credit card debt.

    Liabilities can be broken down into current liabilities and non-current liabilities. These are essentially long-term liabilities that don’t have to be paid back or settled within the year and can include the following:

    • Long-term debt or loans.
    • Bonds issued by a company.

    You’ll need to calculate all liabilities to complete balance sheet accounting equations, practice good bookkeeping and complete or calculate other financial ratios using programs like Excel or others.

    Equity

    Equity is the other significant section of a balance sheet. It’s any money currently held by the company. It can be called shareholders’ equity, stockholders’ equity, owner’s equity or similar names. In any case, this balance sheet section should break down what belongs to business owners and the book or monetary value of any investments.

    Equity can include:

    • Capital in the business — this is how much money the owners have invested into the business.
    • Public or private stock.
    • Retained earnings, which can be calculated by adding up all revenue minus expenses and distributions.

    Note that equity may decrease if an owner takes money out of the company to pay themselves. Equity can also decrease if a corporation issues dividends to shareholders.

    All three of these sections combined to tell you what the company owns, what it can turn into cash if it sells those things and what debt obligations it has or the money it owes.

    Major balance sheet equation

    In a broad sense, every balance sheet’s numbers should add up properly according to the following equation:

    Assets = liabilities + shareholders’ equity

    All of the company’s remaining assets are the same as its liabilities, added with the equity from its shareholders. The company has to pay for all these things by borrowing money (i.e., liabilities) or by taking value from investors (i.e., issuing shareholder equity).

    How does a balance sheet work?

    Balance sheets provide clear-cut, mathematically accurate information about a company’s finances for a given moment. For instance, if a potential investor wants to know whether a company is a good investment, they may request a balance sheet.

    The balance sheet can tell them:

    • What the company owns, and what its general profits are.
    • What the company owes in terms of debt or liability, which can tell the investor whether the company is a risky investment.
    • What the equity in the company is, which tells the potential investor whether investing in the company may provide them with profits later down the road.

    Investors can use different ratios and formulas using the numbers on a balance sheet to determine a company’s financial well-being. These include debt-to-equity ratios and acid test ratios.

    Along with an income statement, an earnings report, and a statement of cash flow, an investor has everything they need to determine the state of a company’s finances.

    Related: A Guide to the Top Three Financial Reports for Small Businesses

    Balance sheets should always balance

    Whether you’re an investor or business owner, remember that a balance sheet should always “balance.” This is where balance sheets get their names.

    Put more simply, the company’s assets should equal liabilities and shareholder equity.

    If for whatever reason, the numbers on a balance sheet do not balance, there are problems, which can include:

    • Inaccurate or incorrect data.
    • Misplaced data (such as one number being put in a spot where it should be somewhere else).
    • Errors with inventory or exchange rate.
    • Miscalculations.
    • Deliberate falsifications on the part of shareholders, company owners, or accountants.

    Why are balance sheets important?

    Balance sheets can be essential for every company, regardless of size or operating industry, because of their many benefits.

    In short, balance sheets help investors and business executives determine risk. Because it is a comprehensive financial statement, it explores everything that a company owns and everything that the company owes in terms of debt or liability.

    In this way, someone looking at a balance sheet can easily assess the following:

    • Whether a company has overextended, such as whether it has borrowed too much money.
    • Whether the company has enough liquid assets to pay off its debts in the event of liquidation.
    • If the company has enough cash on hand to meet current debt obligations.

    Related: Use a Balance Sheet to Evaluate the Health of Your Business

    Balance sheets are also important because they are a prime means to secure investment capital. Business owners usually have to provide balance sheets to potential investors, whether individual investors or large corporations like banks and credit unions. No investor is likely to put money into a business unless they look at a balance sheet first.

    In the long term, balance sheets are essential tools that managers can use to determine profitability, liquidity, and other metrics for their company.

    Once they have this information, they can make wise decisions, such as paying down company debts instead of expanding during a costly, risky period of time.

    What might you need beyond balance sheets?

    Balance sheets are excellent financial documents to have and understand, but you can’t just use these to understand the company thoroughly. There are some limitations and drawbacks to balance sheets.

    For example, balance sheets are static, so they have to be updated regularly. Because of this, an out-of-date balance sheet may not give an accurate picture of a company’s financial health. A company might look financially healthy on one day and appear to be heading toward insolvency on another.

    Because of this, it’s a good idea for investors, business owners, and managers to also acquire cash flow statements, income sheets, and other financial documents if they want to determine a company’s holistic, comprehensive health.

    Balance sheet example

    The best way to truly grasp balance sheets is to look at concrete examples. While you can create balance sheets using Microsoft Word and other word processors, you can also check out premade sample balance sheets from Accounting Coach.

    These example balance sheets include fake corporations with real numbers and equations. They also include balance sheets in different forms, such as account form balance sheets and report form balance sheets.

    Check out these example balance sheets to see how these documents should look when correctly filled out. Try filling in a balance sheet template like your company’s balance sheet to get a practice picture of your company’s financial position.

    So, what are the takeaways about balance sheets?

    Balance sheets are relatively easy to scan once you know what to look for.

    More importantly, balance sheets can tell you a lot about the company’s financial health and help you make wise business or investment decisions depending on your goals.

    Running a business means more than just reading your balance sheet accurately, though.

    Interested in learning more about professional finances? Check out Entrepreneur’s other guides and financial resources today.

    [ad_2]

    Entrepreneur Staff

    Source link

  • Invesco QQQ Trust (NASDAQ:QQQ) Shares Sold by FinTrust Capital Advisors LLC

    Invesco QQQ Trust (NASDAQ:QQQ) Shares Sold by FinTrust Capital Advisors LLC

    [ad_1]

    FinTrust Capital Advisors LLC trimmed its position in Invesco QQQ Trust (NASDAQ:QQQ – Get Rating) by 18.7% during the 3rd quarter, HoldingsChannel.com reports. The firm owned 435 shares of the exchange traded fund’s stock after selling 100 shares during the period. FinTrust Capital Advisors LLC’s holdings in Invesco QQQ Trust were worth $118,000 at the end of the most recent quarter.

    Other institutional investors and hedge funds have also made changes to their positions in the company. PrairieView Partners LLC raised its stake in shares of Invesco QQQ Trust by 419.0% in the 2nd quarter. PrairieView Partners LLC now owns 109 shares of the exchange traded fund’s stock valued at $30,000 after acquiring an additional 88 shares during the period. Birch Capital Management LLC purchased a new stake in Invesco QQQ Trust during the 2nd quarter worth approximately $35,000. Moisand Fitzgerald Tamayo LLC increased its stake in Invesco QQQ Trust by 356.3% during the 2nd quarter. Moisand Fitzgerald Tamayo LLC now owns 146 shares of the exchange traded fund’s stock worth $41,000 after buying an additional 114 shares during the period. Hoese & Co LLP increased its stake in Invesco QQQ Trust by 153.8% during the 3rd quarter. Hoese & Co LLP now owns 165 shares of the exchange traded fund’s stock worth $44,000 after buying an additional 100 shares during the period. Finally, Piscataqua Savings Bank purchased a new stake in Invesco QQQ Trust during the 2nd quarter worth approximately $45,000. 43.08% of the stock is owned by hedge funds and other institutional investors.

    Invesco QQQ Trust Stock Down 1.3 %

    Shares of QQQ opened at $260.10 on Thursday. Invesco QQQ Trust has a fifty-two week low of $254.26 and a fifty-two week high of $403.57. The firm’s 50 day moving average price is $278.50 and its 200 day moving average price is $288.62.

    Invesco QQQ Trust Increases Dividend

    The company also recently disclosed a quarterly dividend, which was paid on Friday, December 23rd. Shareholders of record on Tuesday, December 20th were given a $0.655 dividend. The ex-dividend date was Monday, December 19th. This is an increase from Invesco QQQ Trust’s previous quarterly dividend of $0.52. This represents a $2.62 dividend on an annualized basis and a dividend yield of 1.01%.

    About Invesco QQQ Trust

    (Get Rating)

    PowerShares QQQ Trust, Series 1 is a unit investment trust that issues securities called Nasdaq-100 Index Tracking Stock. The Trust’s investment objective is to provide investment results that generally correspond to the price and yield performance of the Nasdaq-100 Index. The Trust provides investors with the opportunity to purchase units of beneficial interest in the Trust representing proportionate undivided interests in the portfolio of securities held by the Trust, which consists of substantially all of the securities, in substantially the same weighting, as the component securities of the Nasdaq-100 Index.

    See Also

    Want to see what other hedge funds are holding QQQ? Visit HoldingsChannel.com to get the latest 13F filings and insider trades for Invesco QQQ Trust (NASDAQ:QQQ – Get Rating).

    Institutional Ownership by Quarter for Invesco QQQ Trust (NASDAQ:QQQ)

    Receive News & Ratings for Invesco QQQ Trust Daily – Enter your email address below to receive a concise daily summary of the latest news and analysts’ ratings for Invesco QQQ Trust and related companies with MarketBeat.com’s FREE daily email newsletter.

    [ad_2]

    ABMN Staff

    Source link

  • 3 Stocks to Help You Get Through Today’s Market Fear

    3 Stocks to Help You Get Through Today’s Market Fear

    [ad_1]

    Instead of a Santa Claus rally, the market continues to experience volatility at the end of the year with uncertainties surrounding the reopening of the Chinese economy and a looming recession due to seemingly unending interest rate hikes. Given this backdrop, loading up on fundamentally strong stocks Walmart (WMT), Pfizer (PFE), and Cigna (CI) could help investors keep their portfolios resilient. Continue reading….


    shutterstock.com – StockNews

    According to Dow Jones Market Data, the S&P 500 index has traded higher 78% of the time during the end of the year for an average gain of 1.3%. This trend has earned the moniker of the Santa Claus rally.

    However, this year has been one of those 22% of years with no Santa Claus rally. Unpleasant geopolitical surprises, decades-high inflation, and an unusually hawkish Federal Reserve have got us to a situation where positive data churned by a resilient economy was greeted with fresh bouts of volatility and panic-driven selloffs.

    This week’s market pullback raised a few eyebrows as investors have been left to digest China’s plans to scrap all quarantine measures for Covid-19, including requirements for inbound visitors, both foreigners and Chinese nationals, from January 8. This news is likely to ripple through global economies and markets at a time when the effects of tightening monetary policy around the world are still being assessed.

    Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors, summed up this scenario by commenting that it is “the market’s way of kicking a man while he’s down.”

    In such a scenario, shares of fundamentally strong businesses belonging to sectors whose demand is immune to an economic slowdown seem ideal investments to cushion one’s portfolio.

    To that end, we think Walmart Inc. (WMT), Pfizer Inc. (PFE), and Cigna Corporation (CI) look fundamentally strong enough to cushion your portfolio.

    Walmart Inc. (WMT)

    As a world-renowned big box retailer, WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.

    On December 20, WMT announced that it had reached an agreement with 50 states for finalizing the company’s $3.1 billion nationwide opioid settlement framework announced on Nov. 15. This marks a positive step for WMT, which will benefit from moving on from the litigation while helping communities fight the opioid crisis through its pharmacists, who help patients understand the risks about opioid prescriptions.

    On October 27, WMT and Netflix (NFLX) announced an in-store expansion of the popular Netflix Hub in more than 2,400 stores. It would offer customers a brand-new streaming gift card, fan-favorite exclusives, and more.

    For the third quarter of the fiscal year 2023 ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion, with strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex.

    During the same period, the company’s adjusted operating income increased 4.6% year-over-year to $6.06 billion, while its adjusted EPS increased 3.4% year-over-year to $1.50.

    WMT pays a $2.24 per share dividend annually, translating to a yield of 1.59% at the current price. The company has a four-year average dividend yield of 1.70%. The company has increased its dividend for 49 consecutive years.

    WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 3% and 8.6% year-over-year to $619.70 billion and $6.59, respectively. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters.

    The stock has gained 15.5% over the past six months to close the last trading session at $141.29.

    WMT’s solid prospects are reflected in its overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

    WMT also has an A grade for Sentiment and a B for stability. It is ranked #8 of 39 stocks within the A-rated Grocery/Big Box Retailers industry

    Click here to see the additional POWR Ratings of WMT for Growth, Value, Quality, and Momentum.

    Pfizer Inc. (PFE)

    PFE is a world-renowned research-based biopharmaceutical company. The company discovers, develops, manufactures, sells, and distributes biopharmaceutical products, such as medicines, vaccines, and other therapies. The company operates through two segments: Biopharma and PC1.

    On December 21, PFE announced that the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) had accepted its regulatory submissions for Etrasimod for individuals living with moderately-to-severely active ulcerative colitis (UC). In addition to UC, it is being investigated for a range of other immuno-inflammatory diseases.

    On December 9, PFE announced its regular quarterly dividend of $0.41 per share of common stock, payable March 3, 2023, to holders of record at the close of business on January 27, 2023. The first-quarter 2023 cash dividend will be Pfizer’s 337th consecutive quarterly dividend.

    PFE pays a dividend of $1.64 per share annually, translating to a yield of 3.23% at the current price. This compares to the 4-year average dividend yield of 3.63%. The company’s dividend payouts have increased at 5.7% CAGR over the past five years.

    On December 8, PFE and BioNTech SE (BNTX) announced that the FDA had granted Emergency Use Authorization (EUA) of their Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine as the third 3-µg dose in the three-dose primary series for children six months through four years of age.

    This approval is timely, given the current resurgence of infections in various regions worldwide.

    During the fiscal third quarter ended September 2022, PFE’s income from continuing operations improved 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to Pfizer Inc. common shareholders rose 39.7% year-over-year to $10.17 billion, while its non-GAAP EPS grew 40.2% year-over-year to $1.78.

    Analysts expect PFE’s revenue and EPS for the fiscal year 2022 to increase 23.2% and 46.5% year-over-year to $100.17 billion and $6.48, respectively. Moreover, the company has an impressive earnings surprise history as it has topped the consensus EPS estimates in each of the trailing four quarters.

    The stock has gained 2.8% over the past month to close the last trading session at $50.80.

    PFE’s stellar prospects are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Value and a B for Growth, Sentiment, and Quality.

    PFE is ranked #2 of 159 stocks in the Medical – Pharmaceutical industry. Click here for PFE’s ratings for Momentum and Stability.

    Cigna Corporation (CI)

    CI provides medical and dental insurance and related products and services. The company operates through Evernorth and Cigna Healthcare segments.

    On December 21, CI paid its quarterly dividend of $1.12 per share. The company pays a dividend of $4.48 per share annually. This translates to a 1.34% yield at the current price, above the 4-year average yield of 0.61%. The company’s dividend payouts have grown phenomenally at 382% CAGR over the last three years.

    On November 7, VillageMD announced its entry into a definitive agreement to acquire Summit Health-CityMD. Walgreens Boots Alliance, Inc. (WBA) and Evernorth have funded the acquisition valued at approximately $8.9 billion. The combined entity is expected to create a multi-payer platform to deliver quality, affordable care for all patients.

    On November 2, CI introduced its Medicare Advantage (MA) plans in the Savannah, Columbus, Corpus Christi, and Richmond areas. Choices include plans with $0 premiums and attractive extra features, such as a dental allowance and hearing, vision, and fitness benefits.

    This has closely followed CI’s expansion in Connecticut, offering $0 premium plans with attractive extra benefits in Litchfield and Middlesex counties. Medicare Advantage plans are popular with people who qualify for Medicare because they include benefits that Original Medicare does not. Hence, CI’s expansion of geographical reach bodes well for the company’s top line.

    In the third quarter of the fiscal year ended September 30, 2022, CI’s adjusted revenues increased 2.4% year-over-year to $45.36 billion. During the same period, the shareholders’ net income increased 70.1% year-over-year to $2.76 billion. This translated to $8.97 per share, up 86.9% year-over-year.

    Analysts expect CI’s revenue and EPS for the current fiscal to come in at $180.66 billion and $23.17, respectively, up 3.8% and 13.2% year-over-year, respectively. Both metrics are expected to keep increasing over the next two fiscals to $231.58 billion and $28.35, respectively. The company has also impressed by surpassing the consensus EPS estimates in each of the trailing four quarters.

    The stock has gained 2.4% over the past month and 43.9% over the past year to close the last trading session at $331.85.

    CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has a B grade for Value and Quality.

    CI is ranked #5 among 11 stocks in the A-rated Medical – Health Insurance industry. Click here to see CI’s ratings for Growth, Momentum, Sentiment, and Stability.

    WMT shares were trading at $142.59 per share on Thursday afternoon, up $1.30 (+0.92%). Year-to-date, WMT has gained 0.10%, versus a -17.90% rise in the benchmark S&P 500 index during the same period.

    About the Author: Santanu Roy

    Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant.

    With a master’s degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

    More…

    The post 3 Stocks to Help You Get Through Today’s Market Fear appeared first on StockNews.com

    [ad_2]

    Santanu Roy

    Source link

  • 10 Ways to Improve Your Future Financial State

    10 Ways to Improve Your Future Financial State

    [ad_1]

    A 2022 study found that by September of that year, 63% of Americans lived paycheck to paycheck. Many of these people don’t think about how their spending habits will impact their future financial state. It’s easy to get so caught up in your daily wants and needs that you lose sight of your future financial goals. Although people don’t think of accumulating savings as exciting in the short term, it’s extremely important later on down the road. 


    Due – Due

    In the more immediate term, savings provide a cushion in the event that you experience a financial emergency. Without comfortable savings, a trip to the hospital, a layoff or even car troubles could derail your financial stability and plunge you into debt. 

    In the long run, healthy savings will give you the freedom to live your life without fear and will open the doors to greater financial opportunity. The best time to start saving is now, because the sooner you start saving, the higher the payout will be in the future. Here are ten steps you can start taking to improve your future financial state.

    1. Acknowledge your motivations and set goals 

    Before you set out on your mission to improve your future finances, take some time to think through exactly what you would like to accomplish and what is motivating you to make a change in your life. 

    Think about where you’d like to be financially one year, five years and ten years from now. Writing down these aspirations on a piece of paper, on your phone or on your computer will help cement these goals in reality. 

    You should also visualize how your life would improve if you had more savings, financial security and independence. Maybe you hope to own a home, pay off all of your loans or be able to provide for your children. Write down a list of the things that are motivating you to improve your future financial state, and keep them as a reminder for when times are tough or you’ve slipped up. 

    2. Assess your current financial state 

    Next, start thinking more concretely about the actions you need to take in order to reach these goals. One of the first steps in planning for your future is to understand your current financial situation and spending habits. 

    Comb through your credit card and account statements and examine where all of your hard earned cash is going each month. You might surprise yourself by how much you spend on coffee or Ubers each month. You’ll start to recognize the spending patterns eating away at your paycheck and preventing you from accumulating long term savings. 

    You should also account for all of the regular, unavoidable payments that you need to make on a regular basis. Calculate how much you owe for loan payments, rent, mortgages and insurance and see how much of your income needs to go towards these necessities. 

    Once you understand where all of your money is going, you can take a critical look at the spending habits that you need to change. You will also be better prepared to make a realistic monthly budget that you can actually stick to. 

    3. Identify where you can cut back 

    Once you understand your financial past, you can more easily recognize the areas where you can cut back. Maybe you can reduce the number of times you eat out each month. Or, you can make a more concerted effort to take public transportation instead of taking Ubers or Lyfts. Perhaps there are some monthly subscription services you could stand to live without. Only you understand the difference between what you want and what you need to stay healthy and happy. So, engage in some personal dialogue about what things you need and what you can live without. 

    Take 24 hours before making a major purchase like a new computer or a pair of shoes. This time gives you the space to decide whether that item or service you are considering buying is something you will actually need or will help you in the long run. 

    Each person has different spending habits, so the ways in which you cut back will look different for everyone. Do your best to live below your means while still prioritizing the things that bring you genuine joy.  

    4. Create a budget and stick with it

    Budgeting is one of the most important ways to meaningfully boost your savings. A budget makes it possible to set goals and track your spending and is one of the best ways to actually set aside savings on a regular basis. 

    There are several schools of thought when it comes to your budget. Some say you should adhere to the 50/30/20 rule, where 50 percent of your income goes towards your needs, 30 percent goes towards your wants and 20 percent is set aside for savings. Another popular budgeting rule is the 70/20/10 rule. Here, 70 percent of your income goes to bills and everyday spending, 20 percent goes for savings and 10 percent applies to debt repayment.

    These are all just suggested frameworks, and ultimately you should personalize a plan that makes the most sense for you.

    If the thought of making your own budgeting spreadsheet sounds like a drag, there are plenty of free apps to help you customize your budget. Many let you link your accounts, get notifications about your spending and set goals for each of your individualized spending categories. 

    5. Make a separate account for your long-term savings

    You will be less tempted to dip into your savings if you are keeping your savings and your disposable income in separate accounts. Taking the action of transferring money into your savings account each month can serve as a monthly reminder of what you are trying to accomplish and helps you compartmentalize the different ways you’re allocating your income. 

    You may want to set aside your savings money as soon as you get your paycheck so that it is immediately taken out of the equation. This forces you to budget for the upcoming month based on the money left over in your checking account. 

    6. Set up a savings account specifically for emergencies

    By the same logic, it’s a good idea to create an account specifically designed as a safety net in case of emergencies. Peace of mind is one of the main reasons you may be motivated to start saving, and for good reason. Knowing that you can support yourself in the event that you lose your job or encounter an unexpected financial burden can improve your mental health and let you be more present in your daily life. 

    Keeping an emergency savings account separate from your checking account decreases the chances that you’ll dip into it when your disposable income starts to dwindle, and helps you compartmentalize the purpose of your goal of boosting your savings in case of emergency. 

    7. Invest in yourself by taking courses and learning new skills

    Even when you are working on cutting back, be sure to differentiate between what is a frivolous desire and what is a worthwhile self-investment. Investing in yourself can be one of the best ways to improve your future financial outlook so be sure to keep that in mind when making important financial decisions.

    Operating on a budget should not stop you from expanding your skillset or improving your qualifications. Whether you are considering investing in your education, starting a business or even kickstarting a side hustle, an investment in yourself can improve your financial state and pay dividends in the future. 

    8. Start saving for retirement as early as possible

    Most experts agree that you should aim to put 10-15 percent of your annual pretax income towards your retirement savings. If you follow these guidelines, you should be able to live a comfortable life after you’ve retired and might even be able to retire early. If you do not start taking your retirement savings seriously, you could end up working later in life, and spend your time working when you should be relaxing and enjoying your golden years. The earlier you start investing in your retirement savings the more your investment will grow by the time you are ready to retire, so getting started soon is the smartest way to save for retirement. 

    When saving for retirement, there are many investment accounts that have amazing tax saving benefits, like 401ks, IRAs and Roth IRAs. Each account has different nuanced requirements and regulations so look into which option is best for you. 

    However, remember that once you put your money into these types of accounts, there are restrictions on how and when you can access the money in your account.  Even still, most experts recommend you open up a 401k, IRA or Roth IRAs when saving for retirement so you can get the most out of your hard earned savings. The earlier you start investing your savings the more it will grow over time, so be sure to carve out room in your budget for regular contributions to your retirement savings account. 

    9. Get out of debt 

    Interest payments on loans and debts are a painful way to part with your hard earned funds. Unfortunately the only way to end this troublesome cycle is to climb your way out of debt, one payment at a time. The sooner you pay your debts the quicker you can start allocating that portion of your budget for future savings. Therefore, you should make it a priority to pay off your loans and debts as soon as you can. 

    Similarly, don’t waste your money paying late fees, overdraft fees or any other pointless fees that don’t serve your needs or future goals. Stay financially responsible with your accounts, cards and loan payments. It’ll help ensure you avoid making careless mistakes that unnecessarily drain your funds, keeping your cash available for future savings. 

    10. Track your progress over time

    Staying motivated is easier when you keep track of the progress you have already made. Once your savings start to grow and you begin seeing the results of your hard work, you will feel proud of what you have already accomplished, and will be more likely to keep up your healthy spending habits over the course of your life. 

    Diligently saving money is the only way to guarantee you will improve your future financial state. It’s also a surefire way to gain financial independence and freedom. Of course getting started is the most challenging step. However, if you take it day by day, you’ll start reaping the benefits of your financial discipline. Then you’ll see tangible results in the form of dollar signs in your savings account.

    The post 10 Ways to Improve Your Future Financial State appeared first on Due.

    [ad_2]

    John Boitnott

    Source link

  • Is Real Estate Investment Trusts a Good Career Path in 2023?

    Is Real Estate Investment Trusts a Good Career Path in 2023?

    [ad_1]

    Getting into real estate is often considered to be a lucrative career path. But you don’t have to buy and sell properties to join this industry as a professional. You can enter a real estate investment trust (REIT) company or become a REIT investor.

    Keep reading for the info you need to consider to decide if real estate investment trusts are good career paths for professionals like you.

    Real estate investment trusts explained

    A real estate investment trust or REIT is a group of funds or securities for real estate. REIT management companies oversee real estate acquisitions, sales and diversification.

    Think of a REIT similarly to a mutual or exchange-traded fund (ETF). With a mutual fund, several stocks or securities are gathered together into a group. Investors can then purchase mutual fund shares rather than individual shares in the fund itself.

    Similarly, with a real estate investment trust, investors can purchase partial ownership or shares of the trust, thus gaining the financial benefits of simultaneously investing in multiple pieces of real estate or other securities.

    Through REITs, investors can invest in portions of real estate projects or properties and generate profits. Most real estate investment trusts are collections of properties such as hospitals, shopping malls, apartments and other large properties rather than single-family homes, though this is only sometimes true.

    Related: The Most Stable REIT to Buy for a Recession

    Real estate investment trusts are often attractive to investors because they don’t require those investors to finance, purchase or manage any properties by themselves. Instead, REIT companies and their employees handle all the details.

    What does a REIT company do?

    A REIT company acquires real estate properties and securities for its clients. It monitors the market, sells properties when necessary and continues to grow the collected trust and portfolios under its control for the financial prosperity of its clients.

    A REIT company is similar to a mutual fund manager. They take care of the day-to-day monitoring of properties of investments for their clients, plus give out dividends to those clients every month.

    REITs in more detail

    Only some companies that invest in real estate qualify as REITs.

    For a company to be a legitimate REIT, it must:

    • Invest 75% or more of its total assets in real estate and U.S. treasuries for cash.
    • Derive 75% or more of its gross income from interest on mortgages, real estate sales or rent payments.
    • Pay at least 90%of its taxable income as shareholder dividends each fiscal year.
    • Be a taxable corporation.
    • Be managed by a board of trustees or directors.
    • Have at least 100 shareholders or more after the first year of operations.
    • Have no more than 50% of its shares owned by five or fewer people.

    Related: 3 REITs That Could Be the Backbone of Your Portfolio

    Do REITs pay investors dividends?

    Yes, which is part of what makes them so desirable for investors. Both residential and diversified REITs pay monthly dividends to their shareholders and investors. This monthly income comes from rent and mortgage payments from the people who own the properties in the REIT.

    Most REITs have an average rate of return of about 10.5%, similar to the rental rate of return landlords can expect in their first years of operation. Unlike landlords, however, REIT investors don’t need to spend much time and money maintaining or managing properties.

    Note that REIT managers or companies collect a small commission from accrued mortgage and rent payments as the cost of their services. This is what pays the workers of real estate investment trusts, their managers and other professionals.

    So, should you get involved with real estate investment trusts?

    That depends on your career ambitions and prospects. REIT management is a complex and even potentially risky field for many.

    If you get into REIT, you’ll often need to start at the bottom and work your way to the top, so your salary may not be exceptional in the first years of your career. However, the potential rewards of sticking with this career for several years could be pretty enticing.

    You should consider getting into real estate investment trusts as a career path if:

    • You are already interested in investing in real estate. Joining a REIT company could be the best way to learn about this unique investment field and how best to operate within it.
    • You are interested in acquiring real estate and learning more about the real estate market.
    • You have strong management skills.
    • You are comfortable with a certain level of risk — not for yourself, of course, but for your clients.

    What will you do in a REIT company?

    That depends on your exact job title and responsibilities.

    For most in the REIT industry, career paths begin by obtaining a position at a REIT company’s headquarters. You may start with essential maintenance or secretarial work, but gradually learn more about how a REIT company chooses its assets, communicates with its clients, and advertises its services to acquire new clients.

    Real estate investment trusts career paths

    There are multiple potential career paths you can pursue in any REIT industry. Here are just a few examples.

    Related: The Best Careers for Your Personality Type (Infographic)

    Property manager

    You might work as a property manager. Many REIT companies work with third-party property management companies. In a nutshell, property managers maintain rental properties, like apartment complexes or multiple homes throughout the same neighborhood.

    If you work for a property management company, you might eventually be able to work for a REIT. Alternatively, if you work for a REIT, you might work as a property manager for that trust. In this case, the trust takes care of various rental properties, which it maintains and oversees on behalf of its clients.

    Asset manager

    You could also pursue a career as an asset manager. REIT asset managers decide which properties they should purchase and how much debt they need to take out in terms of loans or other financing arrangements to purchase those properties.

    Asset managers also oversee all the aspects of owning and operating properties and ensure property expenses align with projections. This mid-level management job requires a lot of experience in real estate, investing and similar areas.

    Development executive

    Development executives are chief executives for these funds. Thus, they have a lot of sway regarding what properties the REIT purchases, its profit and debt targets, and how the fund evolves.

    Development executives identify opportunities to purchase new properties for the fund’s clients to improve financial prosperity for everyone involved.

    This position pays well and is an excellent stepping stone to senior management positions in other real estate investment industry companies. However, expect to acquire lots of experience in the REIT arena before qualifying for this position.

    Acquisition analyst

    Acquisition analysts are closer to the entry-level or middle manager position than development executives. That said, they are critical.

    REIT acquisition analysts plan, implement, coordinate and identify properties that the fund they work for should acquire. For instance, they may find an attractive apartment complex that needs new investors, then recommend that the REIT company purchase it to diversify the portfolio further.

    Related: 3 REITs to Buy and Hold for the Long Term

    Because of this, acquisition analysts need skills and experience in the real estate investment industry. They need to know how to recognize and understand market trends, spot available properties and know what properties are worth.

    It is also beneficial to have contacts in the real estate or investment industries before applying for these positions in a REIT. For instance, if you are friends with local realtors, you can get an early scoop about up-and-coming properties or new listings from your friends, allowing you to recommend properties to your REIT company or more quickly than other analysts.

    Summary

    Ultimately, you might enjoy working for a REIT company if you like investing, real estate, analysis and similar topics. If you’re successful in this field, you’ll also make a pretty fair salary.

    Check out Entrepreneur’s other resources and guides today to learn more about real estate, investments, and related topics.

    [ad_2]

    Entrepreneur Staff

    Source link

  • Sonic Co-Creator Charged With Illegally Trading Over $1 Million In Final Fantasy Stock

    Sonic Co-Creator Charged With Illegally Trading Over $1 Million In Final Fantasy Stock

    [ad_1]

    An image of Yuji Naka

    Photo: Kevin Winter (Getty Images)

    Last month, the legendary co-creator of Sonic the Hedgehog was arrested for allegedly purchasing shares in a development studio before its involvement in a Dragon Quest game was announced. A month later, he was arrested a second time for reportedly buying stock in a company that was set to work on a Final Fantasy spinoff. Yesterday, Tokyo prosecutors formally charged Yuji Naka for inside trading roughly $1,080,000 in Final Fantasy stock.

    According to NHK, the Tokyo District Public Prosecutors Office determined that Naka had been making a profit on insider trading (Thanks, VGC). For the uninitiated, insider trading is when someone with non-public knowledge of a company is able to use that information to trade stock at an advantage. Doing so is illegal in Japan. So Naka ran afoul of the law when he purchased shares in ATeam before the studio had announced that it would be developing the mobile game Final Fantasy VII: The First Soldier, a battle royale that was exclusively released for mobile devices. Though the game was announced in 2021, Naka was arrested on December 7 of this year.

    This was a month after he had been arrested the first time for buying shares in Aiming, the studio that created Dragon Quest Tact. In both of these incidents, he was arrested alongside Square Enix employee Taisuke Sasaki. Sasaki was indicted for trading roughly $782,000 in stock.

    If the two made a profit off the ATeam stock, it was presumably before The First Soldier was canceled less than a year after its launch. Square Enix had clearly been hoping to capitalize on the popularity of Fortnite and other battle royales. Instead, First Soldier suffered severe performance issues and was exclusively available on mobile.

    Naka had joined Square Enix in 2018 to direct Balan Wonderworld, a strange action-platformer that was near-universally panned as a flop. The game was unfocused and confusing to many reviewers, and Kotaku included it on a list of the year’s biggest gaming disappointments. The director departed Square Enix in June 2021. Maybe Naka would have been better off if he had been focused on directing a good game instead of manipulating the stock market.

    [ad_2]

    Sisi Jiang

    Source link

  • 401(k) Contribution Limits for 2023: Everything You Need to Know

    401(k) Contribution Limits for 2023: Everything You Need to Know

    [ad_1]

    Contributing to a 401(k) may be one of the smartest things you can do to set yourself up for a comfortable retirement in your golden years.

    However, unlike simply stashing money in a savings account, you can only put so much into your 401(k) retirement plan each year due to 401(k) contribution limits.

    Unfortunately, things get a little more complex because the government changes the contribution limits for 401(k)s yearly. Here, you’ll get all the necessary information about 401(k) contribution limits for 2023.

    What are 401(k) contribution limits?

    Put simply, 401(k) contribution limits are federally capped maximum contribution amounts that you can put toward a 401(k) retirement plan. In other words, you can’t funnel every extra dollar you have in your salary toward your 401(k) plan beyond your annual contribution limit.

    There are tax advantages for retirement plans, and higher-paid workers can afford to allocate more funds toward 401(k) and other plans. Limits are put in place to prevent these wealthy individuals from disproportionately benefiting from these plans, which offer tax advantages at the expense of the U.S. Treasury.

    When you invest in a 401(k), you put money toward your future by:

    • Giving your money to the managers of a 401(k) retirement plan.
    • Those managers then use that money to invest in various stock market assets, like mutual funds.
    • 401(k) managers traditionally invest in relatively safe, slow-growth assets that aren’t ideal for earning a lot of money quickly. But they are beneficial to you in ensuring you have enough money to enjoy your golden years.

    Plan limits prevent individuals from gaming the system, especially by taking advantage of employer-matched contributions.

    The IRS also does this to prevent highly compensated employees (HCEs) from taking advantage of employee contributions to inflate their after-tax savings or to scheme the income tax system.

    Many 401(k) plans allow your employer to match your contribution to a set limit (usually a certain percentage or dollar amount).

    Related: 401(k) – Entrepreneur Small Business Encyclopedia

    For instance, if an employer volunteers to match your 401(k) contribution up to 3%, and you earn $2,000 every month for your salary, you can put 6% of that salary’s value toward your 401(k), or about $120.

    If there weren’t any compensation limits, people could try to take more money from their employers by contributing more and more money into their retirement accounts.

    To recap, 401(k) contribution limits stop people from taking advantage of 401(k) plans and their monetary benefits. However, contribution limits for 401(k)s don’t usually stay the same. Instead, they change continuously to keep up with inflation and other economic circumstances.

    Do These Limits Apply to Other Retirement Plans?

    Yes. Generally, 401(k) contribution limits apply to any other “defined contribution plans.”

    These are plans that have defined contribution limits or policies, and they include:

    • 403(b) plans, which are retirement plans typically used by nonprofit and educational workers.
    • 457 plans, which local and state government employees use.
    • Thrift Savings Plans, which the federal government offers.

    401(k) contribution limits for 2023

    With that said, it’s essential to know the 401(k) contribution limits for 2023 so you can plan for how much you’ll invest or how much you’ll deduct from your employment paychecks.

    Here’s a breakdown of the 2023 401(k) income limits:

    • $22,500 — maximum salary deferral or automatic contribution limit for workers.
    • $7,500 — maximum catch-up contributions for any workers aged 50 and up.
    • $66,000 — total contribution limit for the year overall.
    • $73,500 — total contribution limit, including the catch-up contribution mentioned above.

    In other words, you can divert a certain percentage of your salary with each paycheck up to $22,500 plus $7500 if you are 50 or older. However, your employer can contribute extra money to your 401(k) up to a maximum of $66,000.

    How did 401(k) contribution limits change from 2022?

    Because inflation has affected the US economy, the 401(k) contribution limits above have changed from 2022.

    For instance, the 2022 salary deferral limit for workers was $20,500, representing a $2,000 increase in 2023. Similarly, the catch-up contribution limit for all workers 50 and older was previously $6,500 but is now $7,500.

    The total contribution limit was $61,000 and $67,500 for total contribution limits and total contribution limits plus catch-up contributions, respectively. As you can see, the 401(k) contribution limits changed for 2023 by adding a few thousand dollars here and there.

    It’s not a massive change, but if you invested early and wisely, that money could be worth hundreds of thousands or millions of dollars by the time you withdraw it after retirement.

    Employer contribution limits for 2023

    In most 401(k) plans, employers contribute to their employees’ retirement plans up to a certain amount. Employers have much higher maximum contribution limits.

    The maximum amount you can contribute to a 401(k) plan (between you and your employer) is $66,000 in 2023. This limit was $61,000 in 2022.

    Because of this, employers can contribute much more money to your 401(k) plan than you can, but this isn’t typically what happens. Instead, most employers offer relatively meager or moderate 401(k) matching contributions.

    Related: 4 Questions Entrepreneurs Should Ask Their 401(K) Providers

    Don’t expect to add $66,000 to your 401(k) plan yearly. However, if an employer does offer a retirement benefit to this effect, consider taking them up on a job offer to maximize your retirement savings.

    Are there differences between traditional and Roth 401(k) contribution limits?

    No. Whether you have a traditional 401(k) or a Roth 401(k), your contribution limits are the same. The only difference between these two types of 401(k) retirement plans is whether you are taxed on your contributions or tax on your withdrawals.

    Related: Pros and Cons to Choosing a Roth 401(k) Over Traditional 401(k) — and Vice Versa

    Your contributions are tax-deferred with a traditional, employer-sponsored 401(k) plan, and you can deduct those contributions from your gross income each tax year. This elective deferral may let you max out your contributions each year.

    However, when you withdraw money from your traditional 401(k), you must pay taxes on those contributions.

    If you end up in a higher tax bracket when you retire because of how much money you have saved up, you could have to pay much more in taxes than if you had initially paid taxes on your deductions.

    Roth 401(k) plans are the opposite. With a Roth 401(k), you pay taxes on any of your retirement plan contributions in the tax years you earn them. In exchange, you don’t have to pay any taxes on your Roth 401(k) withdrawals later down the road.

    Therefore, Roth 401(k) plans are usually more profitable and affordable in the long run, but they place more of a financial burden on you in the short term. But remember, there aren’t any changes or differences in contribution limits between both plan types.

    What is the ideal amount to contribute to your 401(k) plan?

    Generally, you should contribute as much to your 401(k) plan as possible up to the contribution limit. But the ideal retirement contribution percentage can vary depending on your age, the cost of living, and your personal finances.

    For example, it may be a good idea to contribute between 10% and 15% of all your gross income toward retirement. You can contribute this amount toward a 401(k) or a 401(k) combined with an IRA (individual retirement account) in your 20s and 30s.

    If you are behind in retirement savings in your 40s or 50s, consider contributing more to your 401(k) account. If you’ve already hit your 401(k) plan limit, look into alternatives like IRAs or Roth IRAs.

    Related: 4 Reasons to Look Beyond a 401(k)

    Both IRAs and Roth IRAs also have contribution limits. But IRA contribution limits are separate from your 401(k) contribution limits. For instance, if you can only contribute $22,600 to your 401(k), you can still contribute another $6500 toward your IRA (the contribution limit for traditional IRA and Roth IRA accounts in 2023).

    Don’t forget Social Security, too. Depending on how many calendar years you worked and your taxable income, you could receive additional funds in retirement.

    Summary

    Contribution limits for 401(k) plans have increased since 2022. Since these limit changes are meant to keep up with inflation, that’s a good thing for millions of Americans who rely on 401(k)s to help them save money for retirement.

    Still, there’s much more to saving successfully for retirement than simply putting cash in your 401(k).

    [ad_2]

    Entrepreneur Staff

    Source link

  • What Is a Roth IRA? How It Works and How to Get One Started

    What Is a Roth IRA? How It Works and How to Get One Started

    [ad_1]

    When it comes to retirement, saving sooner is better than saving later. But if you’ve already maxed out your 401(k) or don’t have the option to use a 401(k), you’ll have to turn to an IRA or individual retirement account.

    Traditional IRAs are just one of your options, however. You can instead put money into a Roth IRA. Financial advisors can help you navigate the ins and outs; however, knowing about Roth IRA withdrawal restrictions and annual contribution limits is essential before investing in this type of account.

    This article will explain a Roth IRA, how it works and how you can start one at the earliest opportunity.

    Related: When converting from an IRA to a Roth, do I have to file self-employment tax?

    What is a Roth IRA?

    A Roth IRA is a type of individual retirement account. As a tax-advantaged individual retirement account, Roth IRAs allow you to contribute after-tax dollars. The best way to understand a Roth IRA is to compare it to a traditional IRA.

    A traditional IRA is a tax-deferred account. You contribute money to a regular IRA pre-tax, so you don’t have to pay income taxes on any of those contributions (lowering your gross income).

    You can deduct contributions from your IRA each tax year. However, when you withdraw money from your regular IRA, you must pay taxes on those withdrawals since they are no longer tax-deductible.

    A Roth IRA is the opposite. You contribute money to the Roth IRA and are taxed on those contributions, just like the rest of your regular income.

    However, since that money is taxable income, you don’t owe any taxes when you withdraw money from your Roth IRA. You walk away with more money in Roth IRA income than traditional IRAs.

    You can still only take penalty-free withdrawals (or qualified distributions) after you are 59 1/2 years old, according to the SIPC. Still, Roth IRAs are excellent for securing tax-free income when you’re older, regardless of filing status. Roth IRAs are also FDIC-insured in most cases, usually up to $250,000.

    Roth IRAs are primarily advantageous if you think you’ll be in a higher tax bracket when you withdraw your money (which is true for many Americans). For instance, if you don’t have much money in your 20s and 30s but earn much more in your 60s, you’ll have to pay more taxes on your withdrawals if you use a traditional IRA.

    A Roth IRA allows you to circumvent this downside and have more retirement savings for your golden years. Thus, opening a Roth IRA at a trusted brokerage could be a great way to enjoy tax-free growth of your savings.

    How does a Roth IRA work?

    A Roth IRA works very similarly to a traditional IRA. You sign up for a Roth IRA account at a financing institution, like Fidelity or Vanguard, and regularly contribute to the account.

    Depending on your preferences, you can select your investments individually or have a fund manager take care of them. You can find a Roth IRA from many different financial sources, including:

    You have access to many different investment options through a Roth IRA, even if you do a Roth IRA conversion from another account.

    Note that all standard Roth IRA contributions have to be made in cash. Therefore, you can’t contribute money to your Roth IRA in the form of property or securities; you have to report those contributions, so they’re taxed according to your tax rate.

    Just like regular IRAs, Roth IRA investments grow tax-free. Notably, Roth IRAs are much less restrictive compared to other retirement accounts. You can maintain your Roth IRA indefinitely, and unlike traditional IRAs, there aren’t any required minimum distributions (RMDs).

    The early withdrawal penalty for this type of IRA is the same as with a standard IRA, even if you have a brokerage account handle it.

    Related: Do You Know the Difference Between a Traditional IRA, a Roth IRA, and a 401k?

    Are Roth IRAs insured?

    It depends. If your Roth IRA is at a bank, it may be classified under a separate insurance category compared to regular deposit accounts. Because of this, insurance coverage for most IRA accounts isn’t as comprehensive or robust.

    That said, the Federal Deposit Insurance Corp. (or FDIC) does provide insurance protection worth up to $250,000 for both traditional and Roth IRAs. Note that account balances are combined instead of protected individually, however.

    Contribution rules for Roth IRAs

    Roth IRAs, like other IRAs and retirement accounts like 401(k)s, have contribution limits. Roth IRA contribution limits prevent account holders from investing too much money into their accounts at once.

    For instance, in 2023, the total yearly contribution you can make to a Roth IRA is $6500 if you are under 50. If you are 50 or older, you can contribute another $1500 to your account as a catch-up contribution.

    Withdrawing from a Roth IRA

    Just like a traditional IRA, Roth IRAs have specific rules around withdrawals. Specifically, you cannot withdraw any earnings from your Roth IRA without incurring fees unless you are 59 ½ or older.

    Note that that’s not the same thing as contributions; you can withdraw contributions (such as the original amount of money you put into the account) at any point. This earnings withdrawal limit prevents people from using their Roth IRA as a traditional investment or stock trading account.

    Since most people retire around 59 ½, the government charges a 10% penalty and other taxation fees if you withdraw any earnings or gain money from your Roth IRA early.

    In addition, there’s a “five-year rule” to keep in mind. If you start your Roth IRA late in life, you can withdraw your earnings tax-free only if you withdraw that money five years after your first contribution to any Roth IRA under your name.

    The five-year time clock begins with your first contribution to any Roth IRA, not just the one from which you want to withdraw funds.

    Of course, there are some exceptions to these rules. You could avoid the 10% taxation and penalty rate if you use the earnings from your Roth IRA to buy a home for the first time. But in this case, you can only take out $10,000.

    Furthermore, if you have a permanent disability or pass away, you or your beneficiary can take money out of your Roth IRA.

    Bottom line: Try to plan that won’t be withdrawing money from your Roth IRA until you retire.

    Related: Should I Use a Roth IRA to Pay for College?

    What can you invest in with a Roth IRA?

    Once you open a Roth IRA, you can invest in a wide range of funds, stocks, assets and other investments. You can invest in the following:

    • Stocks

    • Mutual funds

    • Bonds

    • Exchange-traded funds or ETFs

    • Certificates of deposit or CDs

    • Money market funds

    • Cryptocurrencies, but remember that the IRS does not let you contribute cryptocurrency directly to your Roth IRA (unless you use a new type of Bitcoin IRA)

    Related: Best Retirement Plans – Broken Down By Rankings

    What are the benefits of Roth IRAs?

    Many people open Roth IRAs in conjunction with a 401(k) or instead of traditional IRAs, as Roth accounts offer particular advantages. Some of these include:

    • No minimum distributions are required: You don’t have to contribute a certain amount each year when you have a Roth IRA.

    • No income tax for inherited Roth IRAs: Therefore, if you pass your Roth IRA to an error or beneficiary, they can also get tax-free withdrawals (provided that you meet the five-year rule).

    • Easier withdrawals: With a Roth IRA, you can withdraw any contribution money without taxes or penalties (though you may face penalties if you withdraw investment earnings before the age of 59 ½).

    • Flexible contribution schedules: You can decide how much you contribute to a Roth IRA and when.

    • Plenty of time to add contributions: You have until the tax deadline each year to contribute more money into your Roth IRA to reach the $6500 limit.

    • Extra savings for retirement: You can combine your Roth IRA contributions with a 401(k) retirement plan.

    • Tax-free distributions: After you’ve held your Roth IRA for five years and are 59 ½ years old, you can take any distributions, including investment earnings, from your Roth IRA without paying federal taxes.

    • Open at any age: Anyone can open a Roth IRA at any age, provided they have earned income.

    How can you start a Roth IRA?

    Knowing how to start one for yourself and your retirement future is essential, given the benefits and importance of a Roth IRA.

    Check eligibility

    Your first step is ensuring you are eligible to open a Roth IRA account. Note that you must have earned some income for the current tax year — this does not include any inheritance money you may have received from others.

    Furthermore, income limits may prevent you from opening a Roth IRA. For instance, in the 2023 tax year, the income “phase-out” range (the income bracket allowed to make reduced contributions) is $138,000 and $153,000 as an individual or $218,000-$228,000 as a couple filing jointly.

    Remember, too, that there are limits on how much you can invest into your Roth IRA each year.

    Related: Learn How to Invest Beyond Stocks, FDs, Property And Gold

    Find an investment platform

    Your next step is finding the right investment platform to open a Roth IRA. Practically every stock investment company offers Roth IRA accounts. If you already have a 401(k) or traditional IRA account, you can open a Roth IRA at the same organization, which may be easier than finding another organization.

    Regardless, if you find a good platform or financial institution, ask questions like:

    • Whether there are fees to open or maintain your account (such as annual fees).

    • What kind of customer service the company provides.

    • What types of investments the company offers for your Roth IRA.

    • Whether it costs money to trade with your IRA, which could be important if you plan to buy and sell stocks or securities with your account.

    Examples of institutions that offer Roth IRAs include Fidelity Investments, Vanguard and Charles Schwab.

    Apply for a Roth IRA

    Now it’s time to complete the necessary paperwork and apply for a Roth IRA. You can usually do this online or in person if there’s a local branch of your financial institution nearby.

    In any case, you’ll need a few pieces of key information to complete the process:

    • Your Social Security number or SSN.

    • Your driver’s license or some other type of photo ID.

    • The bank routing number and checking or savings account number that you want to use to contribute money to your account.

    • The name and address of your employer.

    • The name, address and Social Security number for your plan beneficiary; this is the person who can receive money in your Roth IRA if you die.

    Choose your investments

    After opening your Roth IRA, you get to pick your investments. Most financial institutions have advisors to help you choose suitable investments for your portfolio based on your goals.

    For instance, if you want to grow your Roth IRA slowly but surely, your investment advisor may recommend that you choose safe investments.

    If, on the other hand, you are young and looking to save aggressively, they may recommend more aggressive, risky investments since you have time to make up for any lost income.

    Because many people live longer than before, it may be wise to keep many stocks in your portfolio as you age. Since you live longer, it could be wise to continue holding assets in your Roth IRA even after you retire so you can continue making money to pull from.

    Related: Roth IRA – Entrepreneur Small Business Encyclopedia

    Make contributions

    Now, you have to make regular contributions to your Roth IRA. Remember, there are no limits on when you can make contributions; you just have to contribute up to the limit to maximize your portfolio’s growth.

    As you can see, there’s a lot to like about Roth IRAs, and getting one started is just as easy as starting a traditional IRA. Consider your options carefully before contributing to any retirement account, as the penalty for withdrawing ahead of retirement can make switching your plans more costly than you think.

    Looking for more? Explore Entrepreneur’s vast library of professional and business resources here.

    [ad_2]

    Entrepreneur Staff

    Source link

  • AMD, NVDA and 1 Other Semiconductor Stock to Sell Before 2023

    AMD, NVDA and 1 Other Semiconductor Stock to Sell Before 2023

    [ad_1]

    The semiconductor industry has been under pressure due to concerns over shrinking demand and increased government restrictions. Amid this backdrop, fundamentally weak semiconductor stocks NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Wolfspeed, Inc. (WOLF) could be best sold off. Read more….


    shutterstock.com – StockNews

    The chip industry is facing structural upheavals caused by changing U.S. trade policy toward China, supply chain disruptions effectuated by Russia’s invasion of Ukraine, and prevailing recessionary fear blunting demand.

    As per Semiconductor Industry Association, the global chip market contracted in October with a 4.6% decline from the prior year, driven down by the strong influence of shrinking markets in China and Asia-Pacific. In addition, according to a report by Gartner, PC sales are falling off a cliff, as worldwide PC shipments declined 19.5% in the third quarter of 2022.

    While the chips sector is already bracing for waning demand as red-hot inflation squeezed spending, the pressure on the industry has been amplified further by recent regulatory action taken by the United States to curb chip export to China.

    TSMC Chairman Mark Liu said: “The U.S.-China trade conflict and the escalation of cross-Strait tensions have brought more serious challenges to all industries, including the semiconductor industry.”

    Furthermore, with rapid deterioration in the global economy and weakening consumer demand, Gartner expects global semiconductor revenue to decline by 3.6% in 2023.

    Given the bleak outlook of the semiconductor industry, it could be wise to avoid fundamentally weak chip stocks NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Wolfspeed, Inc. (WOLF) before 2023.

    NVIDIA Corporation (NVDA)

    NVDA is a global provider of graphics, computation, and networking technologies. The company operates through two segments: Graphics; and Compute & Networking. The company’s products are used in the gaming, professional visualization, data center, and automobile industries.

    For the fiscal 2023 third quarter ended October 30, 2022, NVDA’s revenue declined 16.5% year-over-year to $5.93 billion, and its gross profit fell 31.4% year-over-year to $3.18 billion. Its total operating expenses increased 31.4% from the year-ago value to $2.58 billion, while its non-GAAP operating income declined 54.6% year-over-year to $1.54 billion.

    In addition, NVDA’s non-GAAP net income and non-GAAP EPS decreased 51% and 50.4% from the previous year’s quarter to $1.46 billion and $0.58, respectively.

    In terms of forward EV/Sales, NVDA is currently trading at 12.85x, 438% higher than the industry average of 2.39x. Its forward Price/Sales multiple of 12.90 is 443.8% higher than the industry average of 2.37. In addition, its forward Price/Cash Flow ratio of 50.80 is 200.5% higher than the industry average of 16.90.

    Analysts expect NVDA’s EPS to decline 39.3% year-over-year to $0.80 for the fourth quarter (ending January 2023). Its revenue estimate of $6.02 billion for the current quarter is expected to decline 21.2% year-over-year. The stock has slumped 54.4% over the past year to close the last trading session at $141.21.

    NVDA’s POWR Ratings reflect weak prospects. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

    It has a D grade for Growth, Value, and Stability. It is ranked #80 out of 92 stocks in the Semiconductor & Wireless Chip industry. Click here to see the other ratings of NVDA for Momentum, Sentiment, and Quality.

    Advanced Micro Devices, Inc. (AMD)

    AMD operates as a global semiconductor company in Computing and Graphics; and Enterprise, Embedded, and Semi-Custom. It serves original equipment manufacturers, public cloud service providers, original design manufacturers, independent distributors, online retailers, and add-in-board manufacturers.

    AMD’s non-GAAP operating expenses increased 46.9% year-over-year to $1.52 billion for the third quarter ended September 24, 2022. Its operating loss came in at $64 million compared to an operating income of $948 million in the prior year’s quarter. The company’s net income amounted to $66 million, registering a decline of 92.8% year-over-year. Also, its non-GAAP EPS decreased 8.3% year-over-year to $0.67 for the same period.

    In terms of forward EV/Sales, AMD is currently trading at 4.22x, 76.6% higher than the industry average of 2.39x. Its forward Price/Sales multiple of 4.34 is 82.8% higher than the industry average of 2.37x. Its forward Price/Cash Flow ratio of 22.34 compared with the industry average of 16.90.

    Street expects AMD’s EPS and revenue to decrease 37.8% and 4.7%year-over-year to $0.70 and $5.61 billion for the fiscal first quarter ending March 31, 2023. Over the past year, the stock has declined 59% to close the last trading session at $63.27.

    AMD’s POWR Ratings reflect its poor prospects. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. It has an F grade for Stability and a D for Growth and Quality. It is ranked #89 out of 92 stocks in the same industry.

    Beyond what we stated above, we also have AMD’s ratings for Value, Momentum, and Sentiment. Get all AMD ratings here.

    Wolfspeed, Inc. (WOLF)

    WOLF is engaged in developing silicon carbide and gallium nitride technologies for power and radio-frequency applications. Its product offerings include silicon carbide and GaN materials, power devices, and RF devices targeted for various applications, such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.

    On November 16, the company announced the offering of $1,300 million of its Convertible Senior Notes due 2029. This reflects the company’s debt obligations.

    WOLF’s total operating expenses increased 35.2% year-over-year to $155.60 million for the fiscal first quarter ended September 25, 2022. Its operating loss widened by 15.2% from the prior year’s quarter to $75.70 million. The company’s non-GAAP net loss and non-GAAP loss per share narrowed 79.4% and 80.9% year-over-year to $4.90 million and $0.04, respectively.

    In terms of forward EV/Sales, WOLF is currently trading at 8.96x, 274.9% higher than the industry average of 2.39x. Its forward Price/Sales multiple of 8.79 is 270.7% higher than the industry average of 2.37. In addition, its forward Price/Cash Flow ratio of 3,337 is significantly higher than the industry average of 16.90.

    WOLF’s EPS for fiscal 2022 is expected to remain negative. The stock has lost 38.3% over the past year to close the last trading session at $69.81.

    WOLF’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, which equates to a Strong Sell in our proprietary rating system.

    It has an F grade for Quality and a D for Value, Stability, and Sentiment. Within the Semiconductor & Wireless Chip industry, it is ranked #90. To see the other ratings of WOLF for Growth and Momentum, click here.

    NVDA shares were trading at $140.13 per share on Wednesday morning, down $1.08 (-0.76%). Year-to-date, NVDA has declined -52.31%, versus a -18.95% rise in the benchmark S&P 500 index during the same period.

    About the Author: Shweta Kumari

    Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

    More…

    The post AMD, NVDA and 1 Other Semiconductor Stock to Sell Before 2023 appeared first on StockNews.com

    [ad_2]

    Shweta Kumari

    Source link