What is dividend yield? It’s an excellent question for budding investors.
Dividends are one of only two reasons to own stocks and the only reason you can rely on stock to any extent. Dividends are the payments publicly traded companies pay to their investors, and the dividend yield measures how much payment you can expect relative to your investment.
What is Dividend Yield?
So, to dig in deeper, what is a dividend yield? The dividend yield is more important than the dividend amount and should be the first and last metric when choosing a dividend stock. The dividend amount could be $1,000 per quarter per share, and the yield is only 1% — this doesn’t amount to much and is less than the average S&P 500 stock. Furthermore, shares that yield 1% while paying $4,000 yearly have an astronomical and prohibitively high share price.
The dividend yield is the rate of return you can expect from a given investment, which is very similar to the yield on a savings account. The difference is that dividend payments and their yields usually pay out at the whim of a board of directors. In this light, a stock that costs $10 and pays a sustainable 5% yield is much more attractive than any dividend stock that pays a mere 1%, no matter how much the payment is in dollars.
Understanding Dividend Yield
The dividend yield is a stock’s income relative to its share price. Expressed as a percentage, it tells investors what income they can expect from a stock in the future.
How to Calculate Dividend Yield
The dividend yield formula is easy to calculate. Here’s how to calculate dividend yield: Divide the annual dividend payment by the stock price and express that as a percentage. For example, a stock that trades for $100 and pays $1 has a 1% yield.
Pros of Dividend Yield
There are many reasons to own dividend stocks, and here is a short list of the top reasons. You can find top dividend stocks using a dividend stock tool.
Income generation: The number one reason to own dividend stocks is to generate income. Dividend stocks pay you to hold them, and you can use dividends to reinvest, pay bills or for other purposes.
Enhance total returns: Dividend yield can enhance a portfolio’s total return or the combined gain of capital appreciation and dividend payments.
Compounding investments: The dividend yield is great for compounding investments. The distribution amount will increase each quarter if you use dividend payments to purchase more shares. If the distribution grows as well, investors can achieve a double-digit compound annual growth rate (CAGR).
Dividend capture strategy: You don’t have to own dividend stocks for more than a day to get the payment. The dividend capture strategy relies on the dividend ex-date vs. the day of record and allows for quick income with less risk.
Cons of Dividend Yield
Dividends, as good as they are, have some negative aspects as well, including the following:
Double taxation: The money used to pay dividends is taxed twice because the company pays taxes on its earnings, and then you pay taxes on your investment gains. This has led to some intense criticism of the tax code, but it is not a reason to avoid dividend stocks.
Income vs. growth: Dividend-paying stocks, specifically the blue-chip dividend growth stocks like Dividend Aristocrats and Dividend Kings, are not in a growth phase. You may not see appreciable capital gains while holding them because growth has already occurred or prices into the market.
Diversification vs. income: You can get diversification with dividend stocks, but it is more challenging for non-dividend-specific portfolios.
Example of Dividend Yield
A div yield is the amount of distribution an investor can expect relative to the initial investment. Dividend yield changes over time, along with fluctuations in price. Yield can also be used as a trigger for entering a top dividend stock.
If a stock pays $3 per share in dividends annually and costs $100 to buy the stock, the yield is 3%. One sector that pays well-known dividends is the consumer staples sector, which yields about 2.35% on average. Stocks within the group have yields that range from 4% or better to under 2%. In some cases, they fall in the 1% range. Remember, it’s not the number of dividend stocks you own; it depends on the quality.
Evaluating Dividend Yield
The dividend yield is easy to evaluate. The yield of most stocks relates to pertinent data, including the most basic metrics of comparison. After the yield itself, you may be interested in the payout ratio, the CAGR and the number of years of dividend increases. The payout ratio is the amount of earnings a company pays in the form of dividends.
A higher payout ratio may indicate that a company pays out most of its income to investors. The dividend distribution could change if it needs to buy something or has an unexpected expense pop up. A low payout ratio is better because it means the company retains a large portion of earnings that it can use to strengthen its balance sheet, expand the business or buy back and retire shares.
The CAGR is the average annual growth over a set time, usually three or five years. A higher CAGR is always better, but the higher the CAGR, the higher the unsustainable growth trajectory. A stock with a 5% CAGR might grow its dividend yearly for many decades at the same pace, while one with a 15% or 20% CAGR should slow increases over time.
The number of years of increases can also help you make decisions. Stocks with a history of sustained annual increases are usually well-run, and you may rely on them for future payments and dividend increases.
Finally, you should always check the balance sheet to see if you should worry about excessive debt. Most companies have some debt, but it should be manageable and not involve too much cash flow.
Some metrics of interest may include the leverage ratio and the coverage ratio. The leverage ratio shows debt relative to equity the company has on the books. Lower debt relative to equity is better — under three times is very good. The coverage ratio tells the company’s ability to service its debt, so higher is better. A company with low debt and a high converge ratio should have plenty of room on the books to pay dividends and increase the distribution.
Why You Should Use Dividend Yield
Dividend yield is a valuable tool for investors. It tells you how much income a stock generates, and you can use it to evaluate a stock’s health and even its attractiveness relative to peers. For example, when looking at two stocks that are fundamentally equal in every way, the yield could be a deciding factor.
If one stock pays more than the other or has a better outlook for distribution growth, then it is most likely the better buy. If the yield is excessively high, it could signal a red flag. You might want to look for a higher payout if it is too low.
Should You Only Buy Stocks with High Dividend Yield?
High-yield investing is an essential subset of dividend investing. High-yield investors try to maximize their portfolio returns by only focusing on higher-yielding investments. However, first, define “high yield.” High yield could include any stock that pays more than the broad market S&P 500 average. In late 2022, that was about 1.5%, which was less than half the yield on the 10-year treasury at the time. In other cases, high yield may mean choosing the highest-yielding stocks in a sector, regardless of the payout relative to other sectors.
For others, high-yield investing means targeting stocks with truly high yields — yields above 5% and 10%, in some cases. However, many of the issues on Wall Street that pay those kinds of returns are unsustainable, irregular or erratic, which can lead to excessive volatility and loss of capital.
High-yield stocks may return capital to shareholders and not pay dividends from profits, causing erosion of shareholder value. Focus on high- or higher-yielding stocks but not necessarily at the slam-dunk win that it looks like at face value.
Dividends: Why Investors Buy Stocks
Dividends are one of the most critical aspects of the stock market. Some stocks, like the Dividend Aristocrats and Dividend Kings, have increased their payments yearly for decades. A stock with decades of annual dividend increases has already proven its value and ability to navigate uncertain times.
FAQs
Have questions about dividends and dividend yield? Let’s take a look at some answers to commonly asked dividend questions.
What does the dividend yield tell you?
The dividend yield tells you the amount of payment a stock distributed to its investors as a percentage of stock price. The higher the yield, the larger the payment relative to the stock price.
Why is dividend yield important?
The dividend yield is significant because it measures return on investment dollars. The higher the yield, the better, in most cases.
What is a good dividend yield?
A good dividend yield is one the investor is happy with, and the company can sustain. Steer clear of an unsustainable dividend, no matter the yield.
On a day when the broader market soared over 500 points, Lucid Group, Inc. (NASDAQ: LCID)was a notable laggard. Shares of LCID stock fell by less than one percent. But it continues the downward trend for the stock, down 30% in the last month and over 80% in 2022.
One sore spot for investors is that the company recently completed a previously announced $1.5 billion equity offering. In a capital-intensive business like electric vehicles (EVs), investors have come to expect that start-up companies will need to raise funds as they achieve scalability.
But when the company announced that one of the stated reasons for the infusion of cash was strengthening its balance sheet, it raised concerns. Specifically because Lucid has delivered some recent victories, one of these was a battery agreement with Panasonic Holdings Corporation (OTCMKTS: PCRFY).
When an Order Isn’t an Order
In 2020 and 2021, several EV companies, including Lucid, went public. These companies used one metric to spark investor interest: the number of reservations they had. This represented consumers who had put down a deposit for one of the company’s cars. It also gave companies like Lucid the ability to point to potential revenue.
But potential orders aren’t the same thing as actual orders. Lucid reports that it will fall significantly short of meeting its full-year goal to deliver 6,000 to 7,000 vehicles.
And consumers, for reasons that are not entirely clear, are beginning to cancel their orders. In the company’s most recent earnings report, reservations were down by 3,000 vehicles. While not all of those were cancellations, internal emails show that the company is more than a little concerned that cancellations are becoming a concern.
Should this affect your decision to buy LCID stock? Think about it like this. When company insiders sell their company’s stock, it’s seen as a negative sign. However, there are many reasons insiders may sell a stock, and most of those have nothing to do with their belief in the company’s outlook.
It’s possible (and I should put that in air quotes) that the same logic applies here. There can be many reasons for customers to cancel their order. Inflation remains high. Job losses are mounting. Depending on how you view it, the economy is already a recession or soon will be. There are many reasons why customers may be canceling a commitment for an EV that will cost north of $100,000.
But a cancellation is still a cancellation. And that may signal that the EV market is facing supply and demand problems.
Is EV Adoption the Slam Dunk it Appears to Be?
Recent advertising suggests that mass EV adoption is already here. That may be closer to reality in major metropolitan areas. I know in my corner of small-town U.S.A., that’s not the case yet.
Of course, one reason is a lack of available vehicles. But it also goes deeper. Aside from one location for Tesla charging, there is no established charging infrastructure. And that’s not a reality isolated to my small corner of the world.
Two December news items suggest automakers may also believe this to be the case. First, Toyota Motor Corporation (NYSE: TM)president Akio Toyoda said that there is the silent majority in the auto industry that questions whether the industry should pursue EVs exclusively.
Second, in its annual survey of 900 automotive executives, KPMG, the international consulting and accounting firm, revealed growing pessimism about EV adoption. This was being enhanced by rising inflation and supply chain concerns.
However, the survey also said 50% of the executives were still confident that EV adoption would increase significantly by 2030. Toyoda, however, said that Toyota is still avoiding making a firm commitment to the buildout of an all-electric fleet as the right solution has yet to be determined.
LCID Stock May Still Have Further to Fall
Depending on your perception, electric vehicle adoption is either taking longer than expected or is right on track. Whichever view you have, it will take many years, if not many decades, for mass EV adoption to be a reality.
That doesn’t mean LCID stock doesn’t have a path to success. Lucid Group is assembling and delivering vehicles. That’s more than a lot of SPAC companies can say. But it needs many things to go right on both the supply and demand front. And with the stock trading at over 20x sales, it’s more likely to go down than up in a risk-off market.
Typically, retirement is a time when you can kick back and relax. And, there’s nothing wrong with that. You’ve paid your dues, after all. However, learning new skills can help you keep your mind sharp.
Due – Due
Did you also know that in the U.S., many institutions offer senior citizens free college courses? Taking advantage of these programs is a great way to discover new interests, stay on top of your intellectual game, and prevent isolation.
Even better? A grade isn’t always important. Audit classes are often offered without homework or exams for seniors in many schools. Furthermore, retirees may be entitled to free tuition.
With that in mind, here’s a rundown of the requirements for the best colleges for retirees across the country.
Alabama
According to the Alabama Commission on Higher Education, all Alabama residents age 60 and older can enroll in two-year post-secondary institutions for free. These include any of Alabama Community College System’s 24 community and technical colleges, such as Calhoun Community College in Decatur, Alabama Technical Institute, and Marion Military Institute
However, the University of Arkansas offers its silver foxes the chance to become “Senior Razorbacks.” If you didn’t know, the Razorback, the university mascot, is a feral hog known for its “tenacious, wild fighting ability.”
In order to gain access to tuition-free classes, you must:
Have an Arkansas residency
Be at least 60 years of age
Graduated from high school or earned a GED
Obtain an admissions offer from the University of Arkansas
There are some people who are not interested in retiring to Florida. If you’re in that boat, you might want to consider the Last Frontier State if you prefer a colder climate in your retirement years.
At the University of Alaska, which comprises three campuses across the state, residents 65 and older are eligible for free tuition. There are no fees or surcharges associated with course fees and surcharges, and admission to classes is granted on a “space available” basis.
Those who qualify for the Senior Citizen Tuition Waiver must fill out a short form.
Arizona
In Arizona, tuition deals for older residents aren’t free. There is, however, a 50% discount on resident tuition rates at Maricopa (County) Community Colleges for residents 65 and over (currently $85 per credit hour). Fees for registration and specific courses are also required.
Those over the age of 65 are eligible for a senior discount on all for-credit classes in the college system with open seats. Non-credit courses do not qualify for a discount.
Are looking for a classroom environment designed exclusively for seniors? Arizona State University and the University of Arizona offer noncredit courses through their Osher Lifelong Learning Institute, which partners with universities nationwide to offer noncredit courses. The membership fee is $20 per semester.
Arkansas
All state-supported colleges, including community colleges, waive tuition and student fees for Arkansas residents 60 and older.
In this case, the freebie is available only for for-credit courses, and it is subject to availability.
California
As a result of Education Code 89330, CSU students who are seniors are entitled to free tuition. That means all campuses must waive tuition for California residents ages 60 and over. A number of tuition, application, health, and instructional fees are waived.
In addition, California state colleges also waive application fees and class activity fees for older students. For student fees, which cover the student body association and health facilities, you’ll only have to pay $1.
Students in their golden years can take courses in art, the humanities, agriculture, and computer science during regular sessions.
Colorado
The Colorado State University offers free classes for lifelong learners age 55 and older on a space-available basis. But those classes don’t lead to college credits. To request a lifetime learner class visit, complete the Lifetime Learner Class Visitation Request Form. Students who are lifelong learners will not be charged for student services such as student health, counseling, and event tickets.
Continuing education classes such as theater, Italian, and women’s studies are free for lifelong learners. Just note that the cost of additional courses is determined on an individual basis.
Connecticut
Residents 62 years of age and older are eligible to receive free tuition at Connecticut colleges and universities, according to state law. Across the state, the University of Connecticut, Connecticut State University, and 12 regional community-technical colleges follow this policy. But, it may be a good idea to focus on UConn’s senior citizen audit program, which allows seniors to audit undergraduate courses.
Applicants age 62 and older, who have been admitted to UConn and CSU, are eligible for the tuition waiver.
After paying students have enrolled in the course, there must also be enough room in the course.
Tuition is free, but any additional class fees are your responsibility.
Delaware
For Delaware residents 60 and older, Delaware’s three public higher education institutions, including the University of Delaware, waive tuition and other fees. As a matter of state law, Chapter 34, Subchapter X to be exact, it’s enforceable. Be aware, though, that UD’s Over-60 Tuition-Free Degree Program works on a space-available basis and doesn’t cover continuing education.
Residents aged 65 and older have access to classes after paying students have enrolled. A formal degree must be pursued by older applicants, as well as meeting all the class requirements. For example, if only students majoring in that field are eligible.
Students 60 and older must pay lab fees, books, and other supplies related to the course even with free tuition.
Florida
Any Florida resident over 60 who takes for-credit classes at one of Florida’s state universities is exempt from tuition and fees thanks to Florida statute Chapter 1009. But, the credits you earn won’t count toward your degree. Also, all students who pay for classes, as well as state employees, get first dibs.
In particular, UF’s 60-plus program offers free tuition and covers fees for seniors auditing courses. Waivers are subject to availability, and courses may be restricted by the university.
Georgia
Several states’ constitutions mention free education for senior citizens, and Georgia is one of them.
Under Provision 4.2.1.9 in the Georgia Constitution, seniors aged 62 and over are eligible for free college. Unless the course is taken at a dental, medical, veterinary, or law school, state residents do not have to pay tuition for higher education.
An in-state graduate-level tuition waiver and applicable student fees are included in the 62 or Older Program at Georgia Tech, one of the nation’s top tech institutes.
Hawaii
At the University of Hawaii and state community colleges, courses are free for residents aged 60 and older. This is through the Senior Citizens Visitor Program, which is also known as Nā Kūpuna Program. This translates to “honored ancestor”.
No college credit is given, and no permanent records are kept.
Idaho
On a space-available basis, University of Idaho courses is available to Idaho residents aged 60 and older. Each credit hour costs $5, plus $20 for the course.
It is necessary to wait until after regular registration has ended before registering. In addition to lab fees and special course fees, participants must pay other fees.
Participating in this program only gives participants access to the library and class instruction. Unfortunately, unlike paying students, you won’t have access to athletic events or recreation facilities.
Boise State University, the College of Southern Idaho, and Lewis-Clark State College are other Idaho universities that offer free or low-cost tuition to seniors.
Illinois
Are you a Windy City fan, but prefer the suburbs? In that case, the University of Illinois at Urbana-Champaign, a research pioneer, offers more than 5,000 courses in more than 150 undergraduate studies.
Furthermore, if your household income is below 200% of the federal poverty level and you are 65 or older, you can apply free of charge. Also, to attend the university, you must apply and be accepted.
You may qualify for the Senior Citizen Courses Act Tuition Waiver if you meet these requirements. However, the waiver does not cover fees or other non-tuition costs. This program does not offer extramural or correspondence courses.
Those households that meet the low-income requirements may also receive free tuition at the University of Illinois, Southern Illinois University, Chicago State University, Eastern Illinois University, Governors State University, Illinois State University, Northeastern Illinois University, Northern Illinois University, Western Illinois University, and all public community colleges if they meet the low-income requirements.
Indiana
There isn’t as much generosity in the Hoosier State as in other states. On the other hand, residents 65 and older can take up to nine credits at the state’s public universities at 50% off the normal in-state tuition. It is the student’s responsibility to pay lab fees, application fees, and registration fees.
Indiana State University and Indiana University are among the participating schools.
Iowa
In Indianola, Iowa, Simpson College offers non-credit classes tuition-free for people 65 and older. Are you interested in taking a course for credit? Those can be taken for $375 per credit hour at the discounted rate.
FYI, lab courses do not come with a discount or are free. All classes are subject to space availability, and you may only enroll in one course each semester.
Moreover, Des Moines Area Community College offers free for-credit courses to students 62 and older.
Nondegree-seeking undergraduates and graduates at the Medical Center and KU’s main campus may qualify for a senior citizen waiver. Each semester, students are required to submit a form.
Always wanted to cheer on the Wildcats? If so, you can take advantage of Donovan Scholarship tuition waiver.
The program is only available to adults over the age of 65 who are taking academic courses. With the exception of age and class space availability, tuition programs are fairly flexible. With a Donovan Scholarship, you are able to audit classes without earning credit. Alternatively, you can earn credit even if you don’t plan to earn a degree. If you are seeking a degree, you can enroll in courses as well.
The university will need to accept you for admission if you’re working toward a degree. There are no educational requirements for auditing undergraduate courses.
Louisiana
Tuition and registration fees are waived for residents 55 and older at Louisiana’s public colleges and universities. The program also offers half-priced “reference books, manuals, and other aids to instruction which are required by any course in which such student is enrolled when purchased from a public college or university-operated bookstore.”
Maine
Senior citizens (65 years and older) can take advantage of free college tuition at the University of Maine college system. It also includes those irritating mandatory fees colleges and universities so notoriously charge.
All University of Maine outposts offer undergraduate courses for credit or audit free of charge. Just note that there is a space-available basis for acceptance.
Maryland
For students 60 years of age and older, the University of Maryland at College Park offers the Golden ID Card Program that waives tuition. Other fees, however, may apply.
There are, however, a few conditions. Applicants must be Maryland residents, U.S. citizens or legal permanent residents, and retired (defined as “not engaged in gainful employment for more than 20 hours a week”).
It is possible to register for both degree-seeking and non-degree-seeking courses if you meet the university’s admission requirements.
Program participants have access to academic services including library access and can enroll in three courses per semester.
Massachusetts
State residents over 60 years of age, who the Commonwealth calls “senior citizens,” are exempt from tuition at public universities and colleges within Massachusetts’ higher education system. These include UMass Boston and the Massachusetts College of Liberal Arts.
Michigan
As a Michigan state resident, you’ll need to check to see if the public college or university you want to attend offers free or reduced tuition. For example, Northern Michigan University offers “full tuition scholarships” to residents aged 62 and older. Courses taken off-campus or online are not included. To apply, you must pay an application fee (fee waived), and you must purchase books and course materials.
Here are some more examples
Minnesota
Courses are tuition-free for Minnesota residents 62 and older at the University of Minnesota and across Minnesota State Colleges and Universities. Students who participate in the program are also exempt from activity fees, but they must pay administration fees — unless they are auditing the course. Course materials and service fees may also be charged.
Senior citizens can audit courses at the University of Minnesota for free. But if you wish to earn college credits, you must pay the affordable $10 per credit. Lab fees, course fees, and materials must also be paid.
Mississippi
The Magnolia State doesn’t have a statewide program for free (or nearly so) college tuition, unlike many other states. However, specific universities and colleges do offer some incentives for late-life education.
Using the University of Mississippi’s Lifelong Learners Program, Ole Miss seniors age 65 may take one academic course tuition-free (up to four credits). On any University of Mississippi campus, you can attend classes with your younger peers.
The University of Mississippi also caters to true seniors. Up to two on-campus classes per semester can be taken tuition-free by state residents aged 60 and older. There are a limited number of spaces available on a first-come, first-served basis. And as the university states, “senior citizen students are responsible for paying any course or laboratory fees; distance fees; cost of course materials or textbooks. Credit hours taken in excess of the specified limits of this policy shall be paid by the senior citizen as the actual tuition for those hours.”
For both universities, seniors must apply in the usual way.
Missouri
By law, Missouri residents age 65 and older are guaranteed scholarships that include tuition waivers for all public institutions, including community colleges and State Tech. College credit is not given for courses taken by scholarship recipients, and courses are accepted according to space availability.
Moreover, the school is permitted to charge a registration fee of no more than $25 per semester. To apply, you must first go through the application process.
Montana
There are many programs in the Montana State University System that cater to late-life learners. These include the University of Montana and Montana State University campuses, as well as community colleges. Universities within the system offer tuition waivers (or acceptance to the Golden College Program, as the University of Montana calls it) to residents 65 years and older. A senior student’s tuition is covered, but all other fees are their responsibility.
If you are accepted to a course after the third week of the semester, you may need to catch up for three weeks or more.
Nebraska
In Nebraska, older students don’t qualify for a statewide tuition waiver program. There are, however, some colleges that offer free or discounted tuition.
For instance, Chadron State College offers tuition waivers to seniors. As long as there is space available, you may audit one course per semester.
Nevada
The University of Nevada Las Vegas partners with the Osher Lifelong Learning Institute to offer classes to seniors. UNLV reports that the “OLLI at UNLV program is designed specifically for retired and semi-retired adults who are interested in continuing their education and having the opportunity to meet new and interesting peers.”
It is possible for members to attend as many classes as they like, as long as there is space available. Fall or spring semester registration costs $90. The annual membership fee is $175.
A number of past courses have included The American Election System, Films of David Lean, and Nevada History.
New Hampshire
At the University of New Hampshire, seniors can take up to two for-credit courses tuition-free each academic year. Other costs for the class, including fees and required materials, are the responsibility of the student.
The University offers enrollment based on available space, as with most educational institutions.
New Jersey
According to availability, Rutgers offers free college courses to seniors through its Senior Citizen Audit Program. Residents of the Garden State over the age of 62 can audit classes for no tuition cost but must pay for textbooks.
At Rutgers’ campuses in New Brunswick, Camden, and Newark, seniors can take free college courses.
New Mexico
Retirement classes in New Mexico aren’t free, but they’re pretty cheap. As a result of the Senior Citizens Reduced Tuition Act of 1984, this program is governed by statute.
Upon request by the student, all public post-secondary institutions in the state must reduce tuition for senior citizens — age 65 or older. Per credit hour, there is a fee of $5.
There are some restrictions:
Course requirements must be met.
The maximum number of credits you can take per semester is six.
In order to attend a campus, you must enroll there.
If there is an additional course fee, you must pay it.
There must be space available for you to enroll.
New York
There is a bill in the Assembly that would allow learners over 65 to take for-credit courses for free. However, for seniors, many SUNY campuses waive tuition, including SUNY Purchase.
There are also non-credit seminars, workshops, and courses available for retirees at many SUNY campuses.
North Carolina
University of North Carolina campuses and community colleges offer tuition-free audit classes to seniors 65 and older, on a space-available basis. Additionally, there is no registration fee. But there may be an application fee, depending on the college.
Are you interested in earning college credit? Every semester, seniors 65 and older can take six hours of for-credit courses at the state’s community colleges.
North Dakota
There is no law granting free or nearly free tuition to older residents of North Dakota, unlike many other states. Some state schools, however, offer tuition-free programs with some homework.
North Dakota State University offers one audit course per semester to people 65 and older under its Project 65 policy. There is no tuition or fee associated with this program. Academic departments teaching the courses must grant clearance to participants to audit their courses. Grades and credit aren’t given since it’s an audited course.
State residents 65 and older can also attend Bismarck State College tuition-free for one course per semester if space is available. Fees and other mandatory class expenses are not included in the waiver.
And, at Lake Region State College in Devils Lake, students 65 and older can audit classroom courses if space permits, but fees and course materials must be paid.
Ohio
According to Ohio Revised Code Section 3345.27, all public universities and colleges in Ohio, including community colleges, allow residents age 60 and older to audit undergraduate, graduate-level, or online college courses tuition-free. It is your responsibility, though, to obtain instructor approval and to pay any course fees, including lab fees and required course materials.
There is a law that allows schools to forbid certain classes from enrolling students. “in which physical demands upon students are inappropriate for imposition upon persons 60 years of age or older.”
Senior citizens in Oregon are eligible to audit classes at the University of Oregon at no charge under the senior citizen registration classification. Each department must approve the benefit based on space availability.
In addition to creative writing and metalsmithing classes, seniors can take language, digital art, and disability studies courses.
Pennsylvania
Currently, Pennsylvania does not have a tuition-free law for older students. However, if you look hard enough, you can find a few. Pennsylvania State University, for example, offers a Go-60 program in which state residents 60 and up can take up to six credits each semester, tuition-free, for credit or audit.
People 62 and over can audit up to 12 credits at Clarion University of Pennsylvania free of tuition and fees, provided there is space available. The textbooks and other course materials you need will have to be purchased by you.
Older students are also eligible for free tuition at many community colleges in the Keystone State. Residents 65 and older may enroll free of charge in for-credit courses at Bucks County Community College, near Philadelphia. You may have to pay registration fees.
Rhode Island
There are three colleges in Rhode Island where seniors can pursue their desired programs: the University of Rhode Island, Rhode Island College, and Community College of Rhode Island. As a senior, you can apply to these institutions in almost the same way as you would to most colleges. To qualify, one must be at least 60 years old.
In addition to an application for a tuition waiver, these three institutions require a Senior Citizen Means Test. It is administered to determine if the senior applying has a limited income. A FAFSA must also be submitted by seniors who want to pursue a degree.
South Carolina
For seniors who qualify, Clemson University waives tuition costs.
The university offers Senior Citizen Enrollment to South Carolina residents over 60 years old and who reside in the state.
In classes with space available, you can audit or enroll for credit. The best part? You can take as many credits as you want.
South Dakota
The University of South Dakota, South Dakota State University, South Dakota School of Mines and Technology, Northern State University, Dakota State University, and Black Hills State University all offer 45% tuition discounts to state residents 65 and older.
There is a tuition discount only, not a discount on fees or other course expenses. You can take courses for credit or simply audit them. Online courses are not covered.
Tennessee
When you retire in Tennessee and establish residency, you have the opportunity to further your education at an unbelievable price. Residents 65 and older (and possibly 55 and older if you qualify) can take classes for credit at all state-supported universities and colleges. Fees for maintenance, activities, and student activities are also waived.
The only fee you have to pay is a record-keeping fee ($45 a quarter or $70 a semester).
Texas
State-funded colleges and universities in the Lone Star State allow residents 65 and older to take six credit hours per semester. After all, it is the law under Chapter 54 of the Texas Education Code. Fees, books, and continuing education classes are not covered by this award.
As per Utah law, older residents receive free college tuition, if you define “lunch” as college tuition. Residents 62 and older are exempt from tuition and other charges at Utah colleges and universities (space permitting). According to the University of Utah, these are audited courses. To use the library and such, you will also need a University of Utah student card, which costs $10.
There may also be a registration fee that varies by institution: the University of Utah charges $25 per semester, and Salt Lake Community College charges $10.
Vermont
A Vermont resident 65 and older can audit one tuition-free course per semester at a college within the Vermont State Colleges System, including:
Castleton College
Community College of Vermont
Northern Vermont University
Vermont Technical College.
There is no limit to the number of classes you can take. For each course, you will receive a 50% discount off the regular tuition rate, and you can earn undergraduate credits.
Virginia
For Virginia residents age 60 and older taking three full- or part-time courses for academic credit, the Higher Education Act, Code 23.1-640, waives tuition. In the year preceding the award year, an applicant’s individual taxable income cannot exceed $23,850.
Under the Senior Citizen Waiver Program at the University of Virginia, for-credit courses are offered without tuition or fees.
Washington
Students 60 and older are entitled to a tuition and fee waiver at Washington state universities, regional universities, The Evergreen State’s colleges, and Washington’s community colleges and tech schools. These are credit courses.
As the University of Washington’s website states, senior auditors are admitted to classes as nonmatriculated students (up to six credits per semester). It is not necessary for you to take tests, write papers, or participate in class discussions. There are some courses that cannot be taken.
West Virginia
Under West Virginia law, citizens 65 and older are able to enroll in courses for credit or non-credit at reduced tuition and fees.
For non-credit courses, the total tuition and fee charge cannot exceed $50, and for for-credit courses, tuition cannot exceed 50% of the normal rate charged to in-state residents.
Moreover, students who apply as senior citizens will be admitted as non-degree students at West Virginia University. The application fee is $5, and you must indicate whether you wish to apply for credit on the form.
Wisconsin
For adults 50 and older, the University of Wisconsin offers continuing studies programs. There are in-person and online courses available for professional development and personal enrichment. Senior citizens (with instructor approval) can audit courses for free.
Noncredit classes in history, languages, and writing are also offered through the Continuing Studies program at the top public university.
Several Wisconsin colleges and universities offer discounts on graduate courses for seniors, including Marquette University, which offers 50% off graduate courses for Wisconsin residents aged 62 and older. In addition, you can audit undergraduate courses (no grades, no credit) at a half-price discount. When it comes to those over 62 who are interested in graduate courses, they must “have the proper background and prerequisites for the course in question.”
Wyoming
On a space-available basis, Wyoming residents 65 and older can attend classes for free at the University of Wyoming. To attend the university, you must be admitted and show proof of your age and residency.
There are also special incentives available to retirees at some of Wyoming’s community colleges. As an example, Laramie County Community College allows students age 60 and over to take classes for credit at a 20% discount off the resident tuition rate plus course fees. At the beginning of the semester, students must bring their driver’s license to the Student Hub.
FAQs
1. As a senior citizen, how do I apply for online college?
In comparison to younger students, senior citizens find the college application process much easier. Typically, there is no requirement for test scores, such as SAT, ACT, or GRE, and no essay is required.
There will be different requirements for different states and institutions. However, they generally include the following:
A minimum age of 60 is required.
It is mandatory for you to be a U.S. citizen.
High school diplomas or equivalents are required.
The income requirements for certain waivers and discounts must be met.
2. What are the best colleges for seniors?
You should find out what degree or training a job requires if you’re retired and still want to work. You can use the BLS Occupational Outlook Handbook to determine what degree level you need and the field of study you should concentrate on. Also, ensure that the schools you choose match your educational requirements.
For more information, visit those schools’ websites or contact them by phone or email to speak with a knowledgeable staff member.
3. Are senior citizens eligible for tuition waivers?
It is often necessary to get permission from the instructor in order to receive a tuition waiver because space is limited. There may be restrictions on credit-bearing courses at some schools, while noncredit courses may be eligible at others. A high school diploma and proof of state residency are usually required for eligible participants in some states.
Due to the fact that these programs are not well-publicized, finding the right information may take a little digging. Check your state’s policies or search these sites for terms like “lifelong learning,” “tuition waiver,” and “mature students.”
4. What college Grants and scholarships are available for senior citizens?
If you are a senior, you may be eligible for scholarships and grants offered by the state and university, as well as discount programs offered by private companies. You can determine your eligibility for state and federal financial aid by completing the Free Application for Federal Student Aid (FAFSA).
Additionally, state governments and individual universities offer a variety of scholarships exclusively to seniors. You should still check each individual program for specific costs, but so-called “Encore Programs” are generally offered at moderate or no cost.
5. Why should retirees attend college?
The brain may actually grow new cells and make new connections when we learn something new. In particular, this is of particular importance to seniors, as learning may improve cognitive health and reduce the risk of dementia and Alzheimer’s disease.
Besides that, there are other benefits to going back to school for people in their 50s, 60s, and 70s as well:
AMC has been losing money since 2019. Even before the pandemic, ticket sales had been declining attendance. Higher prices for tickets and concession items drove revenue and hid the fact that fewer people were in seats, munching on popcorn and watching the latest action flick.
Earlier this year, theater operator Cineworld Group PLC (OTCMKTS: CNNWF), which owns the Regal chain of movie theaters, filed for Chapter 11 bankruptcy in a Texas court. The filing, which allows a company to operate while restructuring its debt, was an attempt to slash its $5 billion debt burden.
AMC is in a different position, but it still presents a risk to shareholders and business partners.
However, because it became a meme stock, AMC could raise cash in the public markets. As a result, it’s been able to save off bankruptcy, but ultimately it’s facing a familiar quandary: Expenses must be less than revenue to run a business efficiently. That’s tough for companies operating capital-intensive brick-and-mortar locations in an industry on the decline.
Declining Revenue Growth
AMC’s year-over revenue has been growing, albeit at decreasing rates, as you can see using MarketBeat earnings data for the company. The 2021 yearly revenue growth rates were easy comparisons over 2020, but that’s no longer the case. Revenue grew 27% in the most recent quarter, down from triple- and quadruple-digit rates in the past five quarters.
Ticket sales fell sharply after Labor Day, but with the holiday moviegoing season upon us, it remains to be seen if AMC can post solid year-over-year gains. Unfortunately, there’s potentially bad news with the much anticipated “Avatar: The Way of Water” underperforming expectations.
AMC announced Monday that it had raised $162 million by selling 125.9 million preferred shares.
While the company is officially maintaining the outlook that 2023 business will outpace this year’s, the company remains mired in debt, which is a warning signal for companies like EPR.
EPR bills itself as an “experiential REIT” due to its focus on sports, entertainment and cultural properties, as opposed to typical office buildings and self-storage REITs.
AMC Is Major Tenant
The REIT’s most significant tenant is AMC, whose debt load and decreasing revenue are likely somewhat alarming to EPR’s management team and significant shareholders.
As it happens, Cineworld is also part of EPR’s holdings. Theaters constitute 41% of EPR’s holdings, meaning it’s a business the REIT takes incredibly seriously. AMC is reportedly EPR’s most significant tenant by revenue.
When Cineworld announced its bankruptcy, bond rater Fitch addressed EPR’s status. It said, “Fitch Ratings believes that EPR Properties (EPR) maintains ample cushion within our rating sensitivities to withstand potential implications from the recent declaration of Chapter 11 bankruptcy by Cineworld (not rated), parent of EPR’s third largest tenant, Regal Entertainment Group (Regal; not rated), which represented 13.5% of rental revenue at June 30, 2022.”
Fitch said it didn’t believe theater attendance would regain pre-pandemic levels but expressed confidence that “theatres will remain an important part of movie release schedules.”
Fitch maintained EPR’s rating of BBB-, which places it at the lower end of investment grade.
EPR’s share price has held relatively well this year, down just 10.54% year-to-date. As a REIT, it has the added attraction of pass-through income to investors, a benefit in a down market.
For EPR, a way out of a potential decline in movie theater rental revenue would involve greater reliance on other forms of real estate. The company is already headed in that direction. Its second-largest tenant is Topgolf, and in its third-quarter conference call, EPR said it had recently closed on a property in California that it intends to develop as a resort and on property in Colorado to expand an existing alternative.
Consumer staples giantKellogg Company (NYSE: K) stock is having a great year, trading up +12% versus the S&P 500 (NYSEARCA: SPY) , which is trading down (-20%) for 2022. The high inflation and an uncertain economic climate have benefited consumer staples companies. Kellogg is well known for its popular cereal and breakfast brands, including Special K, Raisin Bran, Froot Loops, Eggos, and Pop-Tarts, along with snacks like Pringles and Cheez-It.
It competes with other cereal makers like General Mills, Inc. (NYSE: GIS) and consumer staples producers like Conagra Brands, Inc. (NYSE: CAG),The Hershey Company (NYSE: HSY), and The Kraft Heinz Company (NYSE: KHC). These food processors are all outperforming the S&P 500 in 2022, with year-to-date (YTD) gains ranging from +10% for Kraft Heinz, +11% for Conagra, +12% for Kellogg, +21% for Hershey to a whopping +29% gain for General Mills. In addition, Kellogg carries extra value for shareholders as it will split into three independent public companies in 2023.
Inflation Benefactors
Packaged food makers benefitted from the pandemic as consumers ate at home, especially during lockdowns. This trend became a lifestyle change for many post-pandemic. While rising inflation meant higher costs for ingredients and commodity prices, these manufacturers passed on the costs to consumers by raising prices.
This inevitably added to the bottom line resulting in continued growth during the post-pandemic period with little normalization. However, the recent CPI data shows inflation starting to ease as it fell to 7.1% for November, credited to the aggressive interest rate hikes from the U.S. Federal Reserve. This is good news for consumers but could mean a retracement for consumer staples stocks as investors migrate back into discretionary and technology stocks that have been hit the hardest by high inflation.
Q3 Fiscal 2022 Earnings Release
On November 3, 2022, Kellogg released its fiscal third-quarter 2022 results for September 2022. The Company reported an adjusted earnings-per-share (EPS) profit of $1.01, excluding non-recurring items, meeting consensus analyst estimates of $0.98. In addition, revenues grew by 8.9% year-over-year (YOY) to $3.95 billion, beating analyst estimates of $3.78 billion.
Kellogg CEO Steve Cahillane commented, “We’re pleased to report another quarter of better-than-expected financial performance and an increase to our outlook for the year. This required navigating effectively through global supply challenges and working to offset cost pressures with productivity and revenue growth management, sustaining momentum in snacks and emerging markets, and continuing to recover inventory and share in North America cereal.”
Upside Guidance
Kellogg issued upside guidance for fiscal full-year 2022 for organic-basis net sales to grow 10%, up from earlier guidance of 7% to 8%. It raised its guidance for adjusted-basis operating profit growth to 6%, up from 4% to 5% earlier. It increased its guidance for adjusted-basis EPS growth to 3% on a currency-neutral basis, up from 2% prior guidance.
The Spin-Offs in 2023
Kellogg will spin off two divisions in 2023 to form three independent public companies. These will be tax-free distributions. Shareholders will receive shares in the two-spin off entities on a pro-rata basis relative to their Kellogg stock holdings at the record date for each spin-off.
The Global Snacking Co. will be the international producer of cereal and noodles, North American frozen breakfast, and global snacks with $11.4 billion in net sales. Its brands include Kellogg’s Frosted Flakes/Zucaritas, Cheez-It, Pop-Tarts, Special K, Coco-Pops, and Crunchy Nut. Nearly 60% of its net sales are derived from Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, Nutri-Grain, and RXBAR. Almost 10% of its net sales come from noodles sales in Africa. Another 10% comes from its Eggo brand and frozen breakfast products. North America represents half its sales, with emerging markets accounting for 30% and developed international markets for 20%.
The North America Cereal Co. will be a leading cereal company concentrating on the U.S., Canada, and the Caribbean, with $2.4 billion in net sales. The business will focus on ready-to-eat cereal distribution in the U.S., Canada, and the Caribbean. Its brands will include Kellogg’s, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi, and Bear Naked.
Plant Co., with $340 million in net sales, is its pure plant-based foods company centered around its MorningStar Farms brand seeking to capitalize on solid long-term opportunities concentrating on North America and future expansion internationally.
Trading Range Break
The weekly candlestick chart shows a double top around $77.00 and a trading range between $74.11 and $69.54. The weekly market structure low (MSL) breakout triggers above $74.11. The double top formed when shares collapsed on its earnings release down to a swing low near $68.00.
The weekly 20-period exponential moving average (EMA) sits at $71.78, and the weekly 50-period M.A. sits at $69.62. The weekly stochastic is attempting to bounce up through the 40-band as volume starts to flatten out. Pullback support levels sit at $69.54 weekly 50-period M.A., $68.60, $68.00 swing low, $66.96, $65.60, $64.36, and $62.53.
If you’ve been successful in your entrepreneurial ventures, you probably have some means of income for your retirement, but usually, entrepreneurs, particularly women entrepreneurs, need to supplement their monthly retirement income to maintain their lifestyle.
Due – Due
Financial risks are higher for women in retirement due to a few factors. They live longer than men and their lifetime earnings are generally less than that of their male counterparts. Both of these factors often mean that women lack the assets to fund a prolonged retirement.
If you’ve been an entrepreneur for most of your working career, it’s likely that you’ll still have the entrepreneurial itch after you retire. Starting a business in retirement seems counterintuitive, though – you’re supposed to be retiring. But there are many businesses that you can start that will still allow you the flexibility and freedom that retirement is supposed to offer.
Here we offer some ideas for businesses that can provide a good monthly retirement income for women entrepreneurs.
Freelancing
You’ve no doubt picked up some valuable skills during your entrepreneurial career. You could freelance in any number of fields, such as:
Writing
Editing
Social Media Marketing
Website Design
Search Engine Optimization
Graphic Design
Accounting
Computer Programming
That’s just a short list of the possibilities. Consider what your specific skills are and get creative. What of value could you contribute to other businesses?
No matter what your skills are, freelancing allows you the flexibility to choose the projects that you want and to work at home on your own time. It can also be quite lucrative. Depending on the nature of the work, freelancers can command anywhere from $20 an hour to well over $100 per hour.
Consultants generally help businesses with a strategy for some aspect of their business. It could be general management strategy, operations strategy, financial strategy, marketing strategy, or information technology strategy.
You’ve undoubtedly gained valuable business insights throughout your career, so consider what your biggest strengths could be valuable to business owners. You could even consider working with a business incubator to do consulting for startup companies.
The management consulting industry in the U.S. has been growing by leaps and bounds for the last decade, with a value in 2022 of nearly $330 billion. Consulting is also very rewarding – you’re helping businesses grow, which contributes to the health of the overall economy. It can earn you a nice monthly income as well, with hourly rates ranging from $50 to $100 or more.
Real Estate Investing
Real estate can bring in a relatively passive monthly income for your retirement. You can either purchase rental properties for recurring revenue or you could buy properties to renovate and sell for a profit. Either way, you can have others do most of the work for you.
If you have rental properties, you can simply hire a management company to handle the day-to-day tasks. If you buy properties to renovate, a general contractor can handle the work.
Both can be very lucrative but in different ways. With the rental property option, it generally takes a lot of units to make a significant monthly income if you’re financing the properties, but you’ll get tax benefits and the benefit of the long-term appreciation of your portfolio.
If you choose to renovate and flip houses, you’ll generate more short-term income, depending on the extent of and time for the renovations. The average gross profit on a house flip in 2021 was $67,000, so if you can find and renovate houses quickly, you’ll have some nice funds for your retirement activities.
Buy an Existing Business
Rather than starting a business from scratch, you could find an existing business to purchase. If you find one with a management team in place, you could play a fairly passive role in the business and just reap the benefits.
You should look for a type of business that interests you and that you have some knowledge about, though, because you’ll still need to oversee your management team.
If you choose to buy a business, be sure to have the help of an attorney to make sure that the deal is done properly and that your interests are protected.
Buy a Franchise
Similar to buying an existing business, buying a franchise makes getting started much easier. You’ll be working with an existing brand and operational strategy, and you’ll have support to get the franchise up and running.
Once it’s established, you can hire a management team so that again, you can play a fairly passive role in the business.
The list of franchises to choose from is nearly endless, and prices can vary greatly. Again, you should choose something that interests you and that you’re somewhat versed in, but make sure that you do your homework and have the franchise agreement thoroughly reviewed.
An eCommerce business can seem overwhelming and expensive to start because you think of all the inventory you’d have to purchase. This does not have to be the case if you find a manufacturer or supplier that offers dropshipping.
Drop-shipping means that when a customer places an order through your eCommerce store, you place the order with the supplier, who then ships it directly to the customer. That means no inventory to purchase and hold.
Your job is just to maintain your website, market your products, and receive and place orders, which you can do from the comfort of your home.
You could do this with any number of products – just look for something that’s unique but has a large market and preferably, a good profit margin.
Online Education
Online education is a booming industry and another way to put your years of knowledge to use. Many online platforms exist that allow you to create and upload your own curriculum and market your courses to your target audience.
Most online classes are self-study, so once your curriculum is online, how much or little to be involved is up to you. You could be available to answer questions by email, or you could hold Zoom sessions that students can attend.
The global e-learning market has been growing steadily for years and is expected to reach a size of $400 billion by 2026, so it’s a great time to get into the industry. And some online class sellers report making up to $100,000 per year, which could fund a few nice retirement vacations.
Plant Nursery
If you’re looking for a business that’s a little more Zen and you have a yard and a green thumb, you could start your own plant nursery at home. You could grow anything from decorative plants and flowers to vegetables and sell them to garden centers or from your own little farm stand.
If you’re really ambitious, you could build a greenhouse in your yard so that you’ll have plants year-round. You could even set up your greenhouse as a mini-garden center and let customers come in and browse.
Profit margins on plants are high, and it doesn’t cost much to get started. Even building a greenhouse can be done fairly economically.
The plant and flower growing industry revenue in the U.S. was more than $17 billion in 2021, so if you can earn even a small share of that market in your own backyard, why not give it a try?
Tutoring
Kids these days face a lot of academic pressure, leading many parents to hire private tutors. Online tutoring is even becoming popular, and is now its own industry, worth more than $8 billion.
If you have a subject that you excel at and some teaching experience, you could either tutor students in your home or set up your own website to do online tutoring.
It would be quite a fulfilling venture to help students meet their academic goals, and you can generally make between $25 and $50 per hour.
Event Planning
Events are back on in the wake of the pandemic – weddings, corporate events, birthday parties, you name it, people are ready to have some fun. If you’re one of those people who thrive on handling the details, an event planning business could provide a nice retirement income.
An event planning business takes very little to get started. You’d just have to market your services and make some connections with vendors. You could specialize in certain types of events or keep yourself open to all options.
The event planning industry in the U.S. was worth more than $4 billion in 2021 in spite of the lingering effects of COVID and is expected to show good numbers for 2022 and beyond.
Typically, an event planner makes a commission of 15% to 20% of the total cost of the event, and the average wedding costs about $20,000, so clearly, even planning one event per month would give you a nice income.
Crafts
Hello Etsy! Etsy is a great platform for craft lovers, both those who make them and those who buy them. If you’re a talented crafter, you could set up your own Etsy store to sell your wares. In 2021 Etsy sellers generated nearly $1.7 billion in revenue, so it’s a great vehicle for sales and much simpler than setting up your own website.
Popular crafts include glass etching and leather goods, as well as up-cycled items, but it all depends on your creative talents. It’s a bit labor intensive, depending on what you make, because you’ll also have to handle the packaging and shipping of your items.
But still, if crafting is your hobby and you enjoy it, why not make it a source of retirement income? Often the best businesses involve doing what you love.
Pet Sitting
If you’re a pet lover, you can make a surprising amount of money as a pet sitter. The daily cost of pet sitting, which includes just one visit to the pet is about $30, and an overnight stay with a pet costs about $75. If you build up a good clientele, that can add up to a nice monthly income.
Working people are willing to pay to have their pets cared for while they’re at work, and others would rather go on vacation, leaving their pet care to a pet sitter rather than an expensive kennel. The fact is people spend a lot of money on their pets, to the tune of $150 billion in 2021 on pet services alone.
It’s a great way to make money while not doing anything too labor or time-intensive, and if you love pets, you’ll have a great time.
Bed and Breakfast
A bed and breakfast can take some doing to get started. You have to find a great property in a desirable location, furnish it appropriately, and equip your kitchen to feed multiple people. However, once you’ve got it set up, you can bring in several hundred dollars a night during the busy seasons!
If you love to play host, you’ll also find it very enjoyable and meet lots of interesting people. Every day will be different, and you’ll be providing a lovely place for people to vacation.
It’s also easier than ever to advertise your B & B, with the success of sites like Airbnb and VRBO.
In Closing
Retirement is supposed to be a wonderful part of life, and you should have the luxury of being financially secure. As an entrepreneur, you know what it takes to start and manage a business, so a new venture can be a fulfilling way to bring in a nice retirement income.
Choose something that you love and something that allows you the flexibility and freedom to enjoy this part of your life. After all these years of working hard, you deserve it!
A lot has happened since my stock market (SPY) commentary last week! We nailed the interest rate hike — 50 bps, as everyone expected — and I was right that the dot plot and post-meeting commentary would spoil the party. This has certainly been a market where any bad news can send the market reeling… and that’s exactly what we’re seeing now. Keep reading for a full update on what’s going on….
shutterstock.com – StockNews
(Please enjoy this updated version of my weekly commentary published December 19th, 2022 from the POWR Growth newsletter).
Despite all of Fed Chair Powell’s messages that there’s “more work to be done” to fight inflation…
Despite all of the warnings from economists and CEOs that a recession is likely in our future…
Despite the mass layoffs and inverting yield curves…
Everyone JUST realized next year is going to be painful. You can see the moment people snapped out of the rose-colored haze they’ve been living in.
Since this is an hourly chart, you can really see how the market reacted as traders digested the news.
Including Monday, the S&P 500 (SPY) has sold off 5% in the four days since Wednesday’s rate hike. Looks like Powell woke up the bears.
And yes, the Federal Reserve’s latest reality check — more on this shortly — is partly to blame for the drop, but we had other forces at work as well.
But I’m getting ahead of myself. Let’s go back to Wednesday, where all this trouble started…
First, the dot plot.
The Fed’s “dot plot” is basically a visual tool that shows where each of the Fed officials believe interest rates will be in the short, mid, and long term. Here’s the September dot plot (left) next to the one from the December 14 meeting (right).
The dots make it plain as day: A number of Fed officials now believe we’re going to have to raise rates even higher… and keep them high for longer.
When the Fed last released these projections in September, they showed forecasts that the fed funds rate would peak between 4.75% and 5.0% sometime in 2023 before slowly coming back down the following years.
Now, we have notably more hawkish projections for rates of 5.1% to 5.4% in 2023 (with some Fed officials forecasting rates as high as 5.5% to 5.75%)…staying above 4% throughout 2024…and then maybe coming further down in 2025.
(Also, I would love to know who that one super hawk is, projecting interest rates of 5.5% to 5.75% THROUGH 2025. Bold.)
Powell’s comments put words to the message painted by the visual — there’s more work to do. A few choice quotes from his post-meeting press conference…
“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate.”
“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.”
In other words, the Fed’s keeping its foot on the gas, and it’s not letting up until the job is done.
The market ended the day about 0.6% lower.
That’s a solid drop, but I expected a bigger reaction to the increased hawkishness and reminder that the mission was far from accomplished. However, at this point, I’m used to the market brushing off these bearish headwinds.
And while the Federal Reserve’s reality check was partly to blame, there were new forces at work as well.
On Thursday, both the European Central Bank and the Bank of England issued their own rate hikes, along with messages that further tightening is likely.
Lastly, the U.S. retail sales report showed spending dropped in November — not a very promising start to the holiday season. The market reacted accordingly, and dropped 2.5% on the day.
Friday was more of the same. The S&P 500 fell another 1.1% on news that S&P Global’s services PMI fell to a four-month low, while its manufacturing index hit a 31-month low in December.
We saw another notch lower today, with the S&P 500 (SPY) closing down 0.9%.
This has been an extremely bearish period following a historically bullish one. Powell keeps saying there’s still a chance for a “soft landing” where we successfully navigate inflation without triggering a recession, but that’s looking less and less likely.
Even if we do end up in a recession, that’s certainly not the end of the world. Stocks have always recovered their recession losses over time, and I don’t expect that to change now.
Is the road going to be bumpy? Yes.
But those bumps don’t mean we should panic. It just means we have to be nimble. The strategies that outperform going forward won’t necessarily be the same as what worked during the bull market. But here’s something incredible…
Applying POWR Ratings to growth stocks has been a consistent winner through bear markets, bull markets, expansions, recessions, and everything in between. Going all the way back to 1999, this strategy has delivered positive returns in every year but two and has beaten the market by double-digit percentage points every year but one.
It’s like nothing I’ve ever seen. And it’s a good signal we should stay the course. Once we’ve weathered the storm and the clouds start to roll out, we’ll own a portfolio of growth stocks ready to take off as the leaders in the next bull market.
Those are going to be some fun times, y’all!
The bears are awake. But here’s a fun fact… in 2022, the market has had nine other selloffs to rival this four-day 5% drop. And six of those nine times, the market went on to rally about 4% to 6% in the days that followed. Maybe we’ll get that surprise Santa Claus rally after all!
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SPY shares . Year-to-date, SPY has declined -19.06%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.
One company that’s been in the headlines lately is Elon Musk’s “other” company Tesla, Inc. (NASDAQ: TSLA). The stock is down 57.35% so far this year, with many analysts attributing at least part of the decline to Musk being distracted with his purchase of Twitter.
Regulatory filings show that on December 14, after the closing bell, Musk sold almost 22 million Tesla shares between December 12 and 14, for a value of $3.58 billion. Many analysts who follow the company believe the proceeds will go toward funding Twitter, which Musk purchased in October.
There was heavier-than-normal downside trading volume on December 12, 13, and 14. The stock declined 6.27% on December 12, 4.09% on December 13, and 2.58% on December 14.
Big investors are taking notice. Insider selling is just a fact of life for publicly traded companies. Contrary to popular belief, it doesn’t always signal that an insider is acting on secret information that will send lower shares. Executives sell shares for prosaic reasons, such as raising cash to buy a house or fund college tuition.
Violating Fiduciary Duty?
But there’s also a corporate governance angle whenever an insider, particularly the CEO, sells large numbers of shares. The CEO’s fiduciary obligation is to the company’s shareholders. If Musk, or any CEO of a public company, takes actions that are to the detriment of other shareholders, that may be violating his fiduciary duty.
Over the weekend, Indonesian billionaire KoGuan Leo, the third-largest individual owner of Tesla shares, called for Musk to step down from his role as the car maker.
On Monday, news broke that Massachusetts senator Elizabeth Warren sent a letter to Tesla board chair Robyn Denholm, asserting that Musk’s actions may hurt Tesla shareholders. Warren also raised the question of whether Tesla’s board, which also has a fiduciary duty to shareholders, has been adequately addressing the situation with Musk. In her letter, Warren asked Denholm if Musk had been misappropriating corporate assets and creating conflicts of interest.
In another twist, Musk asked Twitter users in a poll if they believed he should step down as CEO, saying he would abide by their opinion. Tesla shares initially rose on news that the majority believed Musk should resign as Twitter CEO. Shares pulled into the red about an hour into Monday’s session before rallying again.
Not All The News Is Bad
To be sure, there’s been some good news for S&P 500 component Tesla recently.
Bloomberg reported last week that Tesla is planning to build a new manufacturing facility in Mexico. There’s been no announcement yet from the company, and it’s unclear precisely what Tesla plans to build there.
In addition, PepsiCo Inc. (NASDAQ: PEP) is prepping the rollout of 100 Tesla Semi trucks next year. Thirty-six are already in operation.
MarketBeat analyst data for Tesla show a “hold” rating on the stock. Since November 29, 12 analysts have lowered their price target on Tesla or downgraded their rating. Six boosted their targets or upgraded their rating. One reiterated its “buy” rating.
On Monday, Oppenheimer downgraded the stock to “market perform” from “outperform.”
Meanwhile, Wedbush analyst Dan Ives wrote that he expects Musk to step down from his role at Twitter and renew his focus on Tesla.
Analysts’ consensus price target for Tesla is $264.91, representing a potential upside of 78.23%. That’s certainly a plus for Tesla at the moment, along with Wall Street’s expectation that the company will earn $4.08 per share this year, up 81% from 2022. Next year, that’s seen rising another 40% to $5.72 per share.
Tesla is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
It’s been a rough year for many stocks. And that includes several stocks that outperformed the market in 2021. One strategy that forward-thinking investors employ is to look for oversold stocks. One way to identify such stocks is by looking at a stock’s relative strength indicator (RSI). An RSI of 30 or lower indicates a stock that is oversold. However, any number under 50 suggests there could be bearish sentiment.
The question for investors, however, is which of these stocks are oversold for a reason and which are just oversold? This article looks at five stocks that are down significantly in 2022. Each one has dropped for a reason but gives investors reason to believe there could be a turnaround story in 2023.
Generac stock is down over 72% in 2022. The company is known for its home generators. But the company supplies a range of products, including power generation equipment and energy storage systems for its residential, light commercial, and industrial customers.
The concerns about GNRC stock include the threat of competition and the idea that once customers purchase their products, they won’t need to replace them. This has caused investors to sour on the company even though it has beaten earnings estimates for the last four quarters.
Investors will be watching to see if the company’s revenue and earnings topped out in the second quarter of this year. Still, with the stock trading below pre-pandemic levels, GNRC looks like an oversold stock to buy in 2023. And the analyst community agrees. Of the 23 analysts tracked by MarketBeat, the stock has a consensus price target of $237.10, which is 148% higher than its current price.
Costco can’t be called the biggest loser of 2022. COST stock is “only” down 18% in 2022. But it’s down 24% from the 52-week (and all-time) high it set earlier this year.
Like many retailers, Costco is under pressure as investors fear the consumer is running out of steam. In addition, retail numbers for November came in weaker than expected. And analysts are suggesting the holiday season may be more vulnerable than expected.
The company has been beating on earnings this year, and revenue is up year-over-year. One key for investors to watch will be subscriber retention. So far, this has been no problem for the warehouse club. And if that continues, it will likely allow COST stock to justify its premium valuation. That’s because if consumers continue their membership, they will likely prioritize shopping at Costco (where they can also get gas) above other locations.
Do you remember when TSLA stock was considered grossly overvalued? It seems like a long time ago, but it was only last year. But in 2022, TSLA stock is down 57% even though the company is profitable and is increasing deliveries and revenue every quarter.
Yes, there are macroeconomic headwinds in China and the United States. And the stock is also under pressure as founder and CEO Elon Musk has sold a considerable number of shares, ostensibly to help finance his purchase of Twitter. And, oh, by the way, Musk himself was claiming that TSLA stock was overvalued.
Nevertheless, the bullish case for Tesla comes down to fundamentals. The company has a profit margin nearly double the sector average, and the projections are for solid revenue and earnings growth in the next five years. That means it’s likely that TSLA stock will justify its premium valuation. If it does, buying shares now will be a good investment.
It’s been a roller coaster ride for shareholders of the medical device maker. Shares plunged at the onset of the pandemic as demand for elective medical procedures cratered. In fairness, investors probably overcorrected to the upside in 2021. But another overcorrection is happening, with the stock down over 25% in 2022.
There is a legitimate concern regarding product recalls. The company has reported 23 such recalls in the last two years. That compares to an average of five per year in the prior four years. And the company lowered its earnings guidance in its most recent earnings report.
But once you look past the noise, value investors see a company that has grown its dividend in each of the last 45 years and currently has a yield of over 3.5%. And with MDT, a stock trading at a forward price-to-earnings ratio of 14x, it looks like an excellent choice for income investors.
The energy sector will remain one of the best sectors for investors in 2023. However, in the short term, many energy stocks are under pressure. For example, NextEra Energy is down 14% for the year, but NEP stock recently sliced through two key moving averages and is now considered oversold based on RSI.
The name implies that the company is a leader in the renewable energy sector, and it is. But the company’s portfolio also includes approximately 727 miles of natural gas pipelines. This allows the company to generate strong free cash flow. And the company is telling investors that it plans to apply a significant amount of that cash flow to dividend growth in the next few years.
That means at 14x earnings and with a price target of approximately $85, NEP stock looks like a sound choice for both growth and value investors.
Online pet products and services retailer Chewy, Inc. (NASDAQ: CHWY) stock has nearly doubled off its May 23, 2022, low of $22.22. The pandemic helped accelerate e-commerce usage and pet ownership, which are Chewy’s wheelhouse. Once a pet is adopted or acquired, it has essential needs, including food, medicine, and grooming supplies. Gathering these basic supplies can be a tedious chore to handle every month. Chewy has simplified this with its Autoship service that will automatically ship chosen products to pet owners regularly.
Autoship has been an anchor for the Company regarding consistent and stable cash flow. Customers are incentivized to use Autoship with deep discounts. It also whiteboards its PracticeHub platform for veterinarians to provide an e-commerce marketplace solution to grow practice revenues from its customers. Autoship guarantees recurring business from customers. The Company has teamed with Lemonade, Inc. (NASDAQ: LMND) to expand its CarePlus insurance and wellness programs. The Company expects to launch its nationwide Lemonade offerings in spring 2023. Chewy has proven that
Non-Discretionary Spending
Just as consumers need staples and essential items from grocery stores, pets need their form of crucial medications and food. Chewy notes that 83% of its revenues come from non-discretionary products like pet food and health items, while discretionary items like toys are declining (-5%) YoY.
Chewy has data that indicates how Autoship customers spend $400 annually in year two and up to $900 annually in year 4. Chewy is also expanding its private label products under its brand Tylee’s, and pet wellness brand Vibeful. In addition, it continues to build its Chewy Health eco-system with services like Connect With a Vet telehealth service and CarePlus pet insurance plans.
Profit Surprise
Chewy released its fiscal Q3 2022 earnings ending October 2022 on Dec. 8, 2022. The Company reported an earnings-per-share profit of $0.01 versus consensus analyst estimates for a loss of (-$0.06), a $0.07 beat. Revenues grew 14.5% year-over-year (YoY) to $2.53 billion, beating consensus estimates for $2.46 billion. Autoship sales rose 18.8% YoY to $1.86 billion, making up 73.3% of total sales. Gross margins expanded 200 bps to 28.4%. The Company ended the quarter with 20.5 million active customers, up 9% over Q3 2019.
Chewy CEO Sumit Singh commented, “Chewy’s third-quarter results showed accelerating double-digit topline growth, sustained gross margin expansion, and solid free cash flow generation. The fact that we are simultaneously driving topline growth and expanding margins is proof of our ability to get big fast and fit fast, regardless of the macro environment.”
Upside Guidance
Chewy issued upside guidance for Q4 2022 revenues to come between $2.63 billion and $2.65 billion versus $2.63 billion. Chewy expects full-year fiscal 2023 revenues of $10.2 billion to $10.4 billion versus $9.95 billion consensus analyst estimates. CEO Singh summed up why Chewy is a recession hedge, “The operating environment remains dynamic and evolving. What hasn’t changed is how much pet parents value their pets’ enduring companionship, and this emotional bond sustains the pet category through all phases of the economic cycle.”
Rising Price Channel Emerges
The weekly candlestick chart on CHWY stock illustrates a new rising channel that formed after making a swing low in October 2022. Additionally, the stock held the weekly market structure low (MSL) buy trigger at $29.79 as it proceeded to form higher highs and higher lows into its Q3 2022 earnings report.
The weekly 20-period exponential moving average (EMA) has now crossed back up through the weekly 50-period MA offering rising support at $39.40. The weekly 50-period MA support sits at $38.76. Trading volume remains elevated, with selling being absorbed in the rising price channel. The weekly stochastic has been oscillating higher and continues up towards the 80-band.
A sloppy weekly seed wave will trigger a break of the double top at $51.57, setting up potential reversal zones (PRZs), which also act as price targets based on Fibonacci (fib) extensions. For example, the 1.27 fib target is $59.88, followed by the 1.44 fib target at $64.15 and the 1.618 fib target at $70.19.
Each of these fib targets is a potential reversal area to be aware of, which is no assurance the stock will continue to the next fib target. If CHWY falls below the rising price channel lower trend line, then pullback supports sit at the $37.05, $33.55, $31.89, $29.79 weekly MSL trigger and $26.47
Opinions expressed by Entrepreneur contributors are their own.
In the face of a recession, it can be hard to keep up with the rising costs of vehicle ownership. The average American is spending 17% more on car insurance coverage in 2022 than they were in 2020, and that expense is driving Americans to extreme extents in order to save money. It may be tempting to save money by cutting coverage with your current insurance company. However, I recommend keeping adequate coverage and using alternative methods to save money so you don’t make your problems worse in the event of an accident.
While 16% of drivers are considering moving to a location with better public transportation and walkability, you do not have to relocate or surrender your car to save during a recession. By implementing these simple tips, you can significantly cut down on your monthly payments without sacrificing much convenience or comfort.
While some insurers would suggest drivers shop for car insurance on an annual basis, a recession can cause your finances to change on a whim. Shopping for car insurance every six months ensures that you’re getting the best deal for your financial situation. Car insurance comparison platforms will automatically shop for you every six months and before your policy renewal, so you can stay updated on the best policy options.
If you prefer to conduct your own shopping research, you should start by assessing your own coverage. As you shop, you should compare the rates of other policies that offer coverage that mirrors yours. Make sure you include any applicable discounts (e.g., homeownership, education, safety devices, etc.) in your comparison shopping.
2. Consider usage-based insurance
Usage-based insurance (UBI) lets insurers charge lower premiums for people who drive less often or in safer ways. There are two main types of UBI: driving-based programs and mileage-based programs.
Driving-based programs involve a device being installed in your car that monitors how and when you drive, with the goal of lowering your rates according to how safe you are behind the wheel. Your rates will be determined by factors like how hard you brake, how quickly you accelerate and the time of day that you drive. If your insurer offers a driving-based program, you should avoid driving after midnight, drive less often, and don’t multitask while driving — otherwise, you risk your rates increasing.
Alternatively, there are mileage-based programs that consider the total miles driven each year. Your insurer will calculate your premium based only on how many miles you drive. Even though not all insurers offer this type of plan, if you work remotely or are retired, it might be a good option for you.
Your insurance deductible is the amount you have to cover out of pocket before your insurance company will chip in. This can mean that if you get into an accident and need repairs, you would be responsible for paying them out of pocket — unless the damage falls below your deductible level.
Many people avoid having a high deductible because they worry that they would not be able to cover it if something happened. They fear they will end up being stuck with the bill and unable to afford their car repairs or medical treatment without going into debt or taking out a loan.
But here’s the thing: There are many benefits to having a higher deductible. Generally, you will see lower premiums for higher deductibles; and having more money in your pocket each month could help offset any unexpected costs from accidents or emergencies. Keep in mind, savings vary by company, so before you choose an insurance provider, compare quotes with different deductibles to maximize savings.
4. Take a defensive driving course
Taking a defensive driving course can result in a discount of 5-10%. This can also help you remove DMV points from your record, which will further reduce your insurance costs. If you have taken a defensive driving course due to a court mandate, you won’t be eligible for the discount. Taking an approved course voluntarily is worthwhile, however.
Not all insurance companies honor this discount, so you should check with your provider beforehand. Allstate, GEICO and State Farm are among the national auto insurance agencies that do offer this discount for drivers, so long as you take an approved program.
These simple tips will prove useful both now and in the years to come, allowing you to make smart, informed decisions about insurance coverage regardless of your financial situation. It is hard to know for certain what economic conditions will look like in 2023 and beyond, but it is important to be prepared nonetheless. By implementing these four, easy practices, you can save money and reduce your risk of being overcharged by an insurance company that doesn’t understand your personal finances.
Everyone wants to retire and spend the rest of their lives in comfort and happiness. However, the harsh reality is that a comfortable retirement might take a lot of time to reach for many people unless they properly and intentionally prepare for it.
Due – Due
More often than not, the financial decisions you make today can have a long-term effect, especially on your retirement budget. In fact, the seemingly harmless act of taking out a high-interest loan can significantly contribute to keeping you away from the comfortable retirement life you dream of.
So, to help you optimize your retirement savings, we’ve compiled a list of ways you might unknowingly be eating into your retirement.
Why should you save for retirement?
Saving for something long-term is difficult. Sometimes, even the image of a comfortable retirement life can seem vague to many people, especially when we’re young; thus, when they compare it to a shiny new car, retirement seems to pale in comparison.
So, to drive the point home and to help convince you that saving up for retirement is well worth the sacrifice, we’ve compiled a list of reasons why you should do it.
This list would hopefully paint a better picture of what you should expect when you save for retirement.
#1 You’re probably going to live longer than you expected.
Year after year, technology keeps evolving. Along with that improvement comes advancement in medical technology. As a result, today’s people tend to live longer than the past generations. This longer life span also affects you.
So, if you were expecting to live at least 18 years in retirement, it’s possible that you end up living another 10 or more years on account of advancements in medicine.
It is important to anticipate this longer life span since it can throw off your calculations when deciding on a target amount for your retirement savings. In the end, none of your savings will be wasted, especially since you’ll be spending it all on yourself, your friends, and your family.
#2 Social security may not be enough to cover your expenses.
With today’s rapid rise in inflation, what may be enough in the past might not be enough in the present. That includes your social security.
For example, you’ll need $54k one year from now to afford a $50k lifestyle today due to the current 8% inflation rate. The worst part is that no one knows how the country’s inflation rate will change over time.
So, to consider inflation in preparation for your retirement, you need to supplement your social security with other funding sources like investments and retirement savings. These additional funds would ensure you’ll have enough resources for your retirement.
#3 You can get tax benefits just by saving.
Every paycheck, a huge chunk of it goes to paying taxes. You may or may not agree with these mandatory deductions, but the good news is that there are ways to reduce them.
One of the easiest ways to reduce the taxes you owe is by saving for retirement. The money you put into retirement plans is usually tax-deferred and even tax-free in some states, which reduces the overall taxes you must pay today and leave it for later when you’ll probably be in a lower tax bracket.
This overall deduction in taxes you owe may be insignificant to some, but when they compound over time, you’ll be surprised about how much money you save. In a way, it’s like earning free money just by saving up for retirement.
#4 You can retire independently.
One worry that plagues everyone is the fear of losing their job. They’re worried that if they lose their job, they will have no means of surviving and funding their expenses.
In a way, having a retirement plan and savings can reduce this worry and anxiety because you know that you have funds to support you. You will not need your employer’s or your family’s approval to retire.
The peace of mind you get from having these savings is insurmountable. The idea that you can retire independently without the permission of anyone is empowering.
#5 You deserve to enjoy retirement.
Lastly, there’s no better reason to save for retirement than planning to enjoy it.
We all know that workers are the backbone of society. The value you brought to the economy with your hard work is immeasurable.
The least you could do for yourself is to save up for your retirement so that you can fully enjoy it.
But, regardless of the benefits, many people don’t save enough, and others have a strong saving strategy but unwillingly splurge on a shopping spree setting them back months or even years from their goal.
10 Ways you’re blowing your retirement savings
If that already convinced you to start saving up, then keep reading. This list might help you optimize your savings because sometimes saving for retirement is simply just not enough.
If you don’t remedy these things immediately and let them foster, you can unwittingly push your retirement further away. Even worse, you may blow your savings entirely and end up old and broke.
So, without further ado, these are some things that you might be doing that are blowing your retirement savings.
#1 You keep upsizing
One mistake many people make when preparing for retirement is to keep upsizing. You might be thrilled with the amount of money you find in your bank account that you start thinking that you can afford a more expensive car or a bigger house.
Though there’s nothing inherently wrong with upsizing, the problem is that these small upgrades, over time, compound and eat up a considerable portion of your paycheck.
If you’re not careful, the extra expenses might consume the money that should go to your retirement savings. This inflated cost of living might eventually push your retirement further away.
#2 You spend too much on your children and grandchildren.
Suppose you have a child or children who are now adults out of education. If that’s the case, you should avoid indulging them and allowing them to lay back and depend on you financially. Instead, serve as their guiding light on their road to becoming self-sufficient adults and not appease them with never-ending support.
Similarly, if you already have grandchildren, only burden yourself with raising them if no one else can. You already did your job with your own children. Let them take on the responsibility of raising their kids themselves.
Furthermore, it’s not uncommon for grandparents to feel the need to spoil their grandchildren with gifts. Some will go as far as to go shopping online from outside the United States and have expensive gifts shipped to their grandchildren when they’re traveling. While giving your grandchildren gifts once in a while is fine, you should refrain from spoiling them rotten with gifts, as this can seriously eat into your savings.
Kids today usually want tech presents, which can be vary expensive, with a PS5 going for $500 and an iPhone 13 going for as much as $1,300 or more. The worst part is that, if you get them used to fancy gifts, the day you can’t afford the latest console or mobile phone, they’ll start lashing out at you for no good reason.
Remember, you can be a good parent or grandparent without excessive showering of affection through financial means.
#3 You don’t diversify your investments.
The best way to protect your wealth is to spread it among various securities and forms of investment. If there’s a danger that one adverse event could ruin that one investment, putting all your money into that asset could be a recipe for disaster. Never put all your eggs in a single basket.
By diversifying, you lower the likelihood of suffering a total loss in any one investment. When it comes to investing, having a “go big or go home” mentality focused on a single holding is an almost surefire way to blow your retirement savings.
#4 Your investments are underperforming.
Just like playing a casino game or betting on horses on the race track, risks always come with investments, and success may rise or fall at times.
However, unlike games that rely purely on luck, investing is a calculated risk. This is why investing requires taking the time to study the markets and the business environment, current events, and your investments’ patterns in response.
If this type of analysis is not one of your key strengths, hiring an expert as an adviser is also an option. Spending a little extra to ensure the performance of your investments will be worth it in the long run.
#5 You have no healthcare plan.
You might be tempted to forego a healthcare plan if you are strong and healthy. However, we strongly advise against that. You should always pay attention to your healthcare plan because you never know when you’ll need it.
In fact, growing older, the chances of getting hospitalized increase little by little. Please remember that you won’t be young and healthy forever. Not to mention, there will always be a chance for emergencies to arise, no matter how old you are.
Having no healthcare plan means you have no safety net at all and requires covering your medical bills by yourself. Hospital bills can take your retirement savings out in a single blow and even leave you indebted if you’re not careful.
#6 You pay too many taxes.
Always make sure you are on top of your taxes. Even though paying taxes is a must, there are fiscally responsible ways to lower the amount of money you have to hand over to the government.
You might want to give up some of your salary for novated leases. This strategy is an example of a “salary package,” in which your company takes money from your paycheck to pay your monthly expenses. It can work in your favor by reducing the total amount of your income subject to taxation.
There are several more ways to take charge of your tax bill. To minimize it, we suggest hiring a knowledgeable accountant or tax specialist.
#7 You’re not careful with your money.
As humans, by nature, we are designed to want more. There will always be endless desires, be it new items, investing in a new skill or hobby, or living a more lavish lifestyle.
As a result, some people might take advantage of that mindset and lure you into a get-rich-quick scam. They will tempt you with promises of a more lavish lifestyle in exchange for your money.
As a rule of thumb, never buy into schemes that sound too good to be true, as it could lead to losing all your money.
#8 You have no emergency fund.
A healthcare plan, as mentioned above, is an emergency investment. Emergency funds serve a similar function. Always set aside a part of your income for your emergency fund. Unexpected expenses are frightening if you don’t have a fund for emergencies to shield yourself with.
One example would be the global pandemic that occurred not long ago. If you had no emergency fund at that time and suddenly lost your job, or your business suddenly closed down, it most probably would have been a difficult two years for you.
So, to lessen the risk of losing your savings to an unforeseen event, we recommend you build your emergency fund and avoid life catching you off guard.
#9 You’re borrowing from your retirement savings.
It’s a common scenario for a person to take “just a little bit” of their retirement savings to pay for something they feel they need. Eventually, if they’re not careful, they have already spent a proper fraction of their savings, and it will take considerable money to get back on track.
The temptation to withdraw money from your savings account will always be there. However, you must be disciplined and not spend the money set aside for your future, especially considering that early withdrawals from a retirement account are usually subject to high fees imposed by the IRS.
To remedy this, open up a separate account for your savings so you don’t always see how much you have saved. After all, you can’t be tempted by something you can’t see.
#10 You spend too much on debt.
Paying interest on your debt is like throwing money away. Debt is a double-edged sword. If you aren’t careful with debt, you may end up drowning in interest without even realizing it. This only applies to bad debt, though, like high-interest car loans or credit card debt. It doesn’t apply to debt acquired to finance a profitable business or another source of income.
It will always be ideal to only borrow money if you are confident you can pay it back immediately. An excessive debt might result in a scenario where the money that should have gone into your savings would be wasted on debt interest alone.
If you currently have debt, we recommend paying it off as soon as possible to reduce the money you pay in interest. When doing so, it’s also good practice to focus on paying the debt with the highest interest rate first.
The bottom line
It will be challenging to picture living in the distant future. However, while the destination might still be far ahead, it couldn’t hurt to be prepared. We heavily recommend it. Having a retirement plan and sticking to it can help you in ways you can’t even count.
And if you already have a good deal of savings set aside for retirement, be mindful not to blow it all off before you retire since it can be easy to lose, especially if you’re not careful. Be sure to watch out for the things we listed in this article, and you’ll be just fine.
These days, chip makers and chip-equipment makers are mediocre performers relative to other industries.
However, each company’s outlook is quite different in its area of specialization.
Nvidia is up more than 31% in the past three months, although that rally sputtered in the past month.
Nvidia specializes in chips for video games and other graphics applications. When it reported third-quarter results in mid-November, revenue exceeded expectations, although the company missed earnings views, MarketBeat data show.
Sales of $5.931 billion were 17% below the year-ago quarter. As a result, earnings of $0.58 per share were 50% lower. It was the second quarter in a row in which earnings fell year-over-year.
The company expanded into data-center chips, a business that was dinged by U.S. restrictions on chips exported to China. The cryptocurrency collapse and a decline in crypto mining also hurt the gaming business unit. Covid lockdowns in China also hurt results.
Since the earnings report, shares have been up 4%. Most of that gain occurred during sessions where the broader market also trended higher.
Analysts have a “moderate-buy” rating on Nvidia, according to data compiled by MarketBeat. The consensus price target is $205.23, representing a potential upside of 22.78%.
For the full year, Wall Street sees Nvidia earning $3.27 per share, down 25% from 2021. Next year that’s seen rebounding by 33% to $4.35 per share.
Slower Earnings Growth Ahead?
Advanced Micro Devices, meanwhile, is expected to grow earnings this year and next, although Wall Street sees a more significant bump this year, with growth slowing to just 4% in 2023.
Despite that, analysts’ price targets for AMD show a consensus target of $99.88, which would be an upside of 52.88%. That may seem very optimistic for a stock that’s declined at a similar rate, 53.77%, this year. Nevertheless, it’s worth noting that stock takes more upside juice to regain its former value.
AMD competes with Nvidia in the market for graphics cards. While Nvidia has been gaining market share, some of that has come at Nvidia’s expense. In addition, AMD has suffered for some of the same reasons Nvidia has.
On the other hand, while it and Nvidia have seen weakness in data centers in 2022, analysts expect AMD to see strong growth in that line of business. Nvidia is still a formidable competitor, though, as it announced its Grace line CPU Superchips, slated to begin shipping in early 2023.
In addition, Nvidia has the attraction (for some investors) of paying a dividend, something AMD does not yet offer.
Intel’s Long Price Decline
Meanwhile, well-established stalwart Intel declined 44.45% this year, continuing a downdraft that began in April of 2021. This stock completely missed the rallies that Nvidia and AMD staged heading into the final months of 2021.
In addition, analysts have a dim view of Intel’s earnings growth prospects, forecasting declines of 63% this year and a more subdued drop of 2% in 2023. Intel has reported decreases in net income in six of the past eight quarters, as MarketBeat earnings data show.
Intel remains the market leader in designing and manufacturing chips for servers and personal computers. It also has a robust data-center business.
But Intel made several missteps when it came to new business ventures. Those mistakes resulted in the stock’s failure to rally in 2020, while other techs roared back from the initial pandemic-driven meltdown. As a result, revenue growth in the past two years has been scant or non-existent.
The company’s missteps in recent years included forays into drones, wearables, robotics, virtual reality, self-driving cars, and smart glasses.
However, last year, the company realized the error of its ways and hired a new CEO, Pat Gelsinger, who had served as a chip designer at Intel. A new CEO can often be a catalyst for renewed growth in stock. Gelsinger has discussed ambitious plans to gain ground on Asian chipmakers and make capital investments in U.S. facilities.
Of the three companies, Nvidia appears the most suited to notch substantial price gains in 2023, based on analysts’ expectations for the company’s earnings.
But events such as a new product announcement, a new partnership, or forecasts that exceed expectations always have the potential to send any higher stock than investors or analysts anticipate.
NVIDIA is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
The world’s most prominent movie theater chain AMC Entertainment Holdings, Inc. (NYSE: AMC) stock has fallen (-67%) for the year, and its AMC Preferred Equity Units (NYSE: APE) shares have fallen over 90%. The meme stock craze of 2021, which includes the likes of GameStop Corp. (NYSE: GME) along with AMC stock, is all but a painful memory. The Company wasn’t able to capitalize on its short squeeze to make any dent in its debt load.
The U.S. Federal Reserve Open Market Committee (FOMC) interest rate hikes have not helped AMC either as its interest on first-lien secured debt due in 2026 has risen from 3.10% at the beginning of the year to 5.76% by the end of its Q3.
While the reopening has brought movies goers into its theaters driven by blockbuster releases like The Batman and Black Adam from Warner Bros. Discovery, Inc. (NYSE: WBD) and Top Gun: Maverick from Paramount Global (NASDAQ: PARA), the traffic is still down about a third from pre-pandemic levels. The Company has been able to expand to 950 theaters with 10,500 screens and plans to issue a credit card in Q1 2023 along with an AMC line of popcorn to hit grocery shelves.
The Company claims it will be a positive cash flow by the year’s end with blockbuster releases in Q4 2022 that include Avatar 2 and Black Panther: Wakanda Forever from The Walt Disney Company (NYSE: DIS). It’s hoped that the experience will outstrip the convenience of streaming movies, especially as they get streamed even sooner.
The Last Man Standing Curse
While there is a halo effect for companies that are seen as “the last man standing,” but there is a risk of being obsolete as there’s usually a reason why the competition died out. The last man standing is a status that usually applies to companies in a dying industry, just like Blockbuster Video. Netflix, Inc. (NASDAQ: NFLX) saw the future in streaming video, and it was the nail in the coffin for Blockbuster.
The digital music migration has eliminated the CD music business and record stores. The migration to digital readers and tablets has nearly eliminated bookstores and printed newspapers. The COVID pandemic accelerated the migration to streaming movies which have permanently buried movie theaters. Best Buy Co. Inc (NYSE: BBY) is the last man standing for consumer electronics, but that has worked for them. Analysts from Loop to Citigroup have been cutting AMC price targets down to around $1, with Credit Suisse giving it a $0.95 price target as recently as Oct. 31, 2022.
Q3 Calm Before the Storm?
On November 8, 2022, AMC released its fiscal third-quarter 2022 results for September 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.20), excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.25), beating estimates by $0.05.
Revenues rose 26.9% year-over-year (YoY) to $968.4 million beating $960.97 million consensus analyst estimates. The Company still had $115 million in operating losses for a total (-$225 million) in quarterly losses. Total losses for 2022 was $700 million with (-$750 million) in total cash burn. The Company ended the quarter with $905.2 million in total assets of which includes $685 million in cash and cash equivalents. The company will have $1.6 billion at the end of 2021.
Fall of the APEs
AMC declared a dividend in the form of AMC Preferred Equity (APE) units that began trading on Aug. 22, 2022. The APE units’ purpose was to sell them in the open market to raise cash to pay down its debt without further diluting the stock.
However, since it was basically like a stock split, it didn’t technically dilute the shares but definitely diluted the price. APE units were supposed to be used as currency to raise cash, but the Company has failed to raise enough cash as APE units fell from a high of $10.50 on Aug. 22, 2022, to $0.73 on Dec. 16, 2022. AMC shares fell from $13.09 to $5.31 in the same period. Price dilution, not share dilution, is what hurt investors the most.
Meanwhile, the Company barely raised any monies even to impact the interest payments on its massive $12 billion debt load comprised of $5.3 billion in debt, $4.43 billion in leases, and $2.6 billion in other debt. There are concerns for a capital raise in 2023, but chances are slim that shareholders would approve more dilution in either shares or price.
Amazon to the Rescue?
On Nov. 23, 2022, rumors spread that Amazon.com Inc. (NASDAQ: AMZN) would spend $1 billion to produce 12 to 15 movies annually for movie theaters starting in 2023. This makes sense due to its history of spending heavily on original content, which includes nearly $13 billion in 2021 and $11 billion in 2020. It also acquired the iconic MGM Studios for $8.45 billion.
For years, there’s been speculation and wishful thinking that Amazon would be the proverbial white knight to rescue AMC Entertainment in an acquisition. Amazon does have over $58 billion in cash, and adding another $12 billion to its $164 billion in long-term debt would be a drop in the bucket. Its commitment to releasing theatrical motion pictures is keeping rumors alive that AMC could be a solid distribution channel to add to its eco-system. Time is on Amazon’s side, as the longer, it waits, the cheaper an acquisition would be if it were to happen.
Big Double Bottom Test
The weekly candlestick charts point out the critical double bottom test for AMC stock near $5. It’s last spike to $9.15 on Dec. 1, 2022, saw it plunged (-43%) to a low of $5.13 in two weeks. Tax-loss selling is inevitable heading into the end of the year as investors adjust portfolios to harvest losses. AMC shares once again approach the swing lows that held in April of 2021 and October of 2022. The weekly 20-period exponential moving average (MA) resistance continues to fall at $7.63 followed by the weekly 50-period MA resistance at $9.19. The weekly stochastic is stalling at the 20-band to either cross back down or form a mini pup back up. The weekly market structure low (MSL) triggers on a breakout through $6.80. Volume has been on the light side. Pullback support levels on a $5 breakdown sit at $4.52, $4.27, $3.27, $2.37, $1.98, and $1.30.
Domino’s Pizza, Inc. (NASDAQ: DPZ)has failed to deliver for investors in 2022. As a result, the stock is down more than 33%. That’s significantly higher than the S&P 500 index, which posts a 19% yearly loss.
The company has faced rising ingredient costs and difficulty finding drivers due to higher inflation. That has shown up in the company’s earnings reports. As a result, earnings have missed expectations in the last four quarters.
But analyst sentiment is improving. And in this article, we’ll explain why it may be time for investors to take a bite of DPZ stock while it’s trading below its pre-pandemic price.
Pizza Has Pricing Power
A key reason for analyst optimism is that Domino’s will enter 2023 with its highest prices in over ten years. And analysts believe that the company has room to increase prices on its $7.99 carryout deal and its $6.99 Mix & Match deal.
This comes when analysts believe the company’s ingredient costs are about to level off or slightly decrease. That combination will support higher margins, more substantial earnings, and a higher share price.
Defining the True Cost of Pizza Delivery
According to Statista, consumer spending on pizza delivery hit a new all-time high of $19.8 billion in 2021. That was its most significant year-on-year growth and was up from $14 billion in 2020 and $11 billion in 2019.
But that growth has come at a cost. Specifically, the company finds it hard to find and pay drivers in a tight labor market. However, analysts believe that the current wave of layoffs, hiring freezes, and sticky inflation will likely increase the candidate pool of willing drivers.
And even if it doesn’t, the company says there is some evidence that inflation is causing consumers to steer away from having pizza delivered. However, the company is also reinstituting its “carryout tip” this holiday season which may have the combined effect of driving demand while helping the company navigate delivery problems.
Is It Time to Buy DPZ Stock?
Strictly based on value, there may be better options right now. The stock still has a P/E ratio higher than the sector average. However, if the company hits the expectations for high single-digit earnings growth in the next five years, Domino’s may grow into that valuation.
And while you wait, Domino’s offers a tasty dividend. While the 1.23% dividend yield may not be that exciting for investors, that can be deceptive. The company pays out $4.40 per share, has a sustainable payout ratio of around 33%, and has been increasing its dividend in each of the last ten years.
Most people fall into one of two categories. They are either savers or spenders. Savings are often prioritized for the future to secure retirement and financial security. Spenders prioritize their everyday desires and requirements while maintaining a sound financial situation with the idea of covering their retirement obligations in the future with better income or innovative solutions.
Due – Due
Both of these ideas have advantages and disadvantages.
People who joined the FIRE movement (financial independence/retire early) now say they wish they hadn’t. Only one-third of American seniors have enough funds to live on, while 63% live paycheck to paycheck.
But as a typical individual, which is the better option for you? Saving money or spending it?
Let’s evaluate both choices and make a decision.
What is living a good life?
You’ve probably heard someone declare at some point in their life that they don’t care about money or if they have a stable financial future. Don’t undervalue the significance of leading a successful financial life.
People often claim that happiness is beyond the reach of money. But it can also provide you and the protection and safety of your loved ones, making your life happier.
Humans require money to pay for all the necessities of existence, including food, shelter, medical expenses, and quality education. To pay for these items, you don’t need to be rich or have a lot of money, but you will need some money until you pass away.
Understanding personal finance is crucial since money is required to buy the necessary supplies and services to survive. Living a good financial life means managing your finances responsibly and using your income to maintain a happy life.
Benefits of living a good life
You can exchange your work for goods you value because money exists.
Living a solid financial life while spending money has several significant advantages:
It gives you a vision
Understanding your current status is the first step toward a successful financial life. This covers your present behaviors and financial statements like your cash flow statement (how much money is coming in as opposed to how much is going out) and net worth statement (what you own and owe). Clarifying your current situation will enable you to determine what is feasible and how to achieve your goals.
It liberates you
You can live anywhere you choose, take care of your necessities, and participate in your hobbies when you have enough money. With the freedom of spending money, you may not only get what you want, but also can get out of financial issues swiftly. With a decent amount of cash, you may consolidate credit cards, pay back payday loans, pay off your personal loan or mortgage, get a car, support kids for education and many more things. You’ll experience even more freedom since you’ll be able to spend your time as you like if you achieve financial independence and have enough money to support yourself without working.
It empowers you to take care of your requirements
You can launch a business, construct your dream home, cover the expenses of starting a family or achieve other objectives you think will improve your quality of life if you have money.
It ensures your security and safety
You won’t ever have to worry about having a roof over your head, enough to eat, or being able to see a doctor when you’re sick if you have enough money in the bank. You won’t be able to afford everything you desire because of this, but you will be able to lead a secure middle-class life.
Downsides of living a good financial life
Of course, there are also undeniable drawbacks to leading a lavish lifestyle, such as:
Multiple issues from a love of money or an obsession with it
You might engage in unethical or even criminal behavior, such as theft or defrauding others, if you continuously attempt to get as much money as possible. If you place excessive importance on money or material possessions, it could also cause issues for you and your family. You probably won’t be happy if you have money but no one to live with or anything to do.
Money can cause conflicts
There may be a lot of conflict in your life if you and your spouse or other family members can’t agree on what should be done with the money.
One of the main reasons why American couples divorce is money. Most of these drawbacks have more to do with how people interact with money and their attitudes about it than money itself. You may approach earning and saving money responsibly without letting it interfere with your daily life.
Now we will discuss saving for retirement and its benefits.
What is saving for retirement
Even though retirement may not be on your mind, it’s crucial to start saving now. It will be simpler to achieve your financial objectives and make investments for the future.
According to studies, only 7% of young professionals plan to save money each month. But many of us don’t know that developing a practice of saving money has several advantages and aids in maintaining the purchasing power of your funds.
When it comes to retirement planning, there are three crucial factors to consider:
Forming the behavior of saving money
Saving to maintain the purchasing power of your money
Releasing capital for investment
Although having a sizable retirement fund will give you confidence, saving money is only the first step in creating a financially rewarding future. Saving for retirement does not imply developing wealth at this time; instead, it means setting aside money for future wealth-creating endeavors that will protect the value of your arduous retirement savings.
Keep in mind that retirement planning takes time. It’s a marathon, not a sprint. Starting now, you can put your money to work for you so that you outlive your retirement savings and your wealth, not the other way around.
Benefits of saving for retirement
Get financial elasticity
If you wait until later in your career to start saving for retirement, you’ll need to save much more of your income before retiring. When controlling your ongoing spending, saving $100 monthly instead of $1,000 can make a significant difference. And the importance of compound interest cannot be emphasized enough!
Have access to a retirement plan provided by your employer? Utilize it as quickly as you can. If you don’t contribute to the plan, you’re wasting free money for your retirement, as most employers will match payments up to a specific proportion.
Take the benefits of compound interest
The most significant advantage of retirement investment is probably compound interest. Even though no specific rate of return is guaranteed, starting your retirement savings sooner in your work will result in more money with a lower capital investment than if you wait until later in your career. Compound interest is the process through which an amount of money increases significantly due to interest that keeps adding to itself over time.
You will have $1050 at the end of the year if you invest $1,000 in an account that grows at a rate of 5% annually, for instance. You’ll receive a 5% return on $1050 the following year, which after two years will equal $1102.50.
Have access to assets with higher risks and rewards
You have access to a more diverse portfolio if you invest early. You have the opportunity to invest in higher-risk, higher-reward opportunities. Investment possibilities with a high potential return might give you a more significant financial safety net when you retire. Early retirement investment also raises the likelihood that your investments will survive market turbulence.
Build strong protection against inflation
We’ve been hearing the word “inflation” a lot lately, and it’s vital to understand how it affects your capacity to retire comfortably. It’s a fact of life that we all must deal with and take into account when making retirement plans. People have a better chance of having their retirement funds keep up with inflation if they start investing in them earlier in their careers.
Don’t rely on Social Security benefits
Because of increased longevity among a rapidly aging population that is also rising, coupled with slower population growth, more and more Americans will continue to rely on Social Security benefits. In the long run, Social Security will not be financially sustainable since it will give out more than it takes in.
Social Security benefits are frequently considered when people prepare their finances for retirement. It is essential to plan for the potential that Social Security won’t be an option given the program’s uncertain future.
Get support for extended life expectancies
The average lifespan of people has increased. The longer you live, the more money you’ll probably need to retire and take care of yourself when you cannot work.
Additionally, the expense of your medical treatment will probably rise as you age. Despite having the option to use Medicare coverage, you will still need to budget for out-of-pocket costs. You need to start saving for retirement as soon as possible because healthcare costs are rising every year.
Keep a balance between the both – Is it possible?
Even though you can’t buy happiness, having independence, stability, and the ability to follow your aspirations can make you happy. Work hard, earn money, and develop financial literacy to achieve this. By investing your money, you may make it work for you and increase your output, and eventually, you should have enough to retire.
The truth is that you are not required to choose a side. Striking a balance between spending extravagantly and living as if there is no tomorrow is optimal. These quick methods will help you locate that “sweet spot.”
Make sure you earn enough
Make sure you have enough money to decide whether to spend or save. You can only spend on necessities if you don’t have a sizable salary. There won’t be any extra money for consumption or retirement savings.
If you’ve reduced your spending to the absolute minimum but are still having difficulties making ends meet, it might be time to take a closer look at your pay. Take a part-time or freelance job if you’re saving for a big purchase or want to contribute more to your retirement account.
Identify where you stand
Although it might be step one, consider this to be step zero. Determine where you fit on the saver/spender spectrum by looking at your current way of life and income. This will help you map out your future course.
Then, you might find it helpful to contrast your spending and saving patterns with your income range. With your income, do you spend more on your home, groceries, travel, or pleasures than the average household? Check how much money you have left to consider it as savings.
Over the previous 63 years, the rate of personal savings in the United States has averaged 8.95%. At the moment, it’s about 3.1%.
Your personal finances are probably better than most of your friends if you’re saving more than this. If not, it can indicate that you’re moving away from being a “saver” and toward being a “spender.”
Put priorities first
You might spot some patterns and trends as you review your spending. You might never dine out, but you take a costly vacation every few months. Maybe you are always keen to buy the latest gadgets and tools.
It is advised that you should prioritize your necessities first such as groceries, insurance premiums, payday loan payments or consolidate credit cards.
Do you intend to lead the same way after retirement?
Or do you want to live frugally and explore the world after your work life is over?
Even so, do you have plans to retire now?
A majority of people are still working into their 70s and 80s because they love the social interaction, the organized atmosphere, and the effort to keep their minds active and engaged. If you fall into this category, you have a much-reduced need to save money right now.
However, even if you expect to work well until retirement age, you’ll need to be prepared for things to go wrong with your plan.
Be adaptable and make changes
No one here possesses a crystal ball. Your situation, as well as the general economy, can be incredibly uncertain.
Remember that few economists anticipated the current surge in inflation and a sharp increase in interest rates. Even though there is a global health crisis and record-breaking inflation, anything can happen. A medical emergency could destroy your job and wealth at any time.
Therefore, your retirement and savings goals need to be adaptable, regardless of whether you consider yourself a spender or a saver. The finest plans leave room for the unexpected.
In last week’ s commentary I said “It feels like the S&P 500 (SPY) wants to be bullish, but everyone is extremely anxious… like we’re collectively holding our breath, waiting for the next shoe to drop”. Well drop it did, and hard, with the broader indexes falling considerably on Thursday as everyone finally put together the latest pieces of the market puzzle. Keep reading to find out what the picture is showing us.
shutterstock.com – StockNews
(Please enjoy this updated version of my weekly commentary originally published December 15th, 2022 in the POWR Stocks Under $10 newsletter).
Market Commentary
The S&P 500 (SPY) tumbled 2.5% on Thursday as traders realized next year is going to be painful.
Yes, the Federal Reserve’s latest reality check — more on this shortly — is partly to blame for the drop, but we had other forces at work as well.
But I’m getting ahead of myself. Let’s go back to where all this trouble started…
As I predicted in my last commentary, Fed officials voted to increase interest rates another 50 basis points. Great! A smaller hike. But then we got the latest dot plot and an updated commentary from Powell… and both reiterated that the war against inflation is far from over.
First, the dot plot.
The Fed’s “dot plot” is basically a visual tool that shows where each of the Fed officials believe interest rates will be in the short, mid, and long term. Here’s the September dot plot (left) next to the one from yesterday’s meeting (right).
The dots make it plain as day: A number of Fed officials now believe we’re going to have to raise rates even higher… and keep them high for longer.
When the Fed last released these projections in September, they showed forecasts that the fed funds rate would peak between 4.75% and 5.0% sometime in 2023 before slowly coming back down the following years.
Now, we have notably more hawkish projections for rates of 5.1% to 5.4% in 2023 (with some Fed officials forecasting rates as high as 5.5% to 5.75%)…staying above 4% throughout 2024… and then maybe coming further down in 2025.
(Also, I would love to know who that one super hawk is, projecting interest rates of 5.5% to 5.75% THROUGH 2025. Bold.)
Powell’s comments put words to the message painted by the visual — there’s more work to do. A few choice quotes from his post-meeting press conference…
“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate.”
“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.”
In other words, the Fed’s keeping its foot on the gas, and it’s not letting up until the job is done.
Yes, this absolutely contributed to the selloff we saw on… but as I mentioned at the top, it wasn’t the only factor.
On Thursday, both the European Central Bank and the Bank of England issued their own rate hikes, along with messages that further tightening is likely.
Lastly, the U.S. retail sales report showed spending dropped in November — not a very promising start to the holiday season.
Powell keeps saying there’s still a chance for a “soft landing” where we successfully navigate inflation without triggering a recession, but that’s looking less and less likely.
And if we do end up in a recession, that’s certainly not the end of the world. Stocks have always recovered their recession losses over time, and I don’t expect that to change now.
Is the road going to be bumpy? Yes.
But those bumps don’t mean we should panic. It just means we have to be nimble. The strategies that outperform going forward probably won’t be the same as what worked during the bull market. But here’s something incredible…
Applying POWR Ratings to stocks under $10 has been a consistent winner through bear markets, bull markets, expansions, recessions, and everything in between.
Going all the way back to 1999, this strategy has delivered positive, market-beating returns in every year but one (2008).
It’s like nothing I’ve ever seen. And it’s a good signal we should stay the course.
What To Do Next?
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SPY shares closed at $383.27 on Friday, down $-6.36 (-1.63%). Year-to-date, SPY has declined -18.37%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.
Cryptocurrencies are all the rage right now, and for good reason! The potential for growth is huge, and there are many different options to choose from.
Due – Due
So, which one should you invest in? In this blog post, we will give you a buyer’s guide to the best cryptocurrencies to buy right now. We’ll also provide some helpful tips on how to make the most of your investment. Let’s get started!
What are cryptocurrencies?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, which means they are not subject to government or financial institution control.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Their popularity has grown in recent years as investors have been attracted to their high potential returns. However, cryptocurrencies are also notoriously volatile, and their value can fluctuate sharply. As a result, investing in cryptocurrencies is considered to be a high-risk venture.
The 5 best crypto to buy now
With the crypto market being so volatile, it can be hard to know which coins are worth investing in.
It seems like every day there’s a new coin that is “the next big thing.” How do you know which ones to trust?
We’ve done the research for you. These are the best cryptos to buy right now based on our analysis of price, market cap, and future potential.
Bitcoin (BTC)
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoin can be used to pay for things electronically if both parties are willing. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.
However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network.
Ethereum (ETH)
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference. It is a censorship-resistant platform where users are in full control.
No middleman can halt transactions or block users. Instead, users interact directly with each other, peer-to-peer. This all happens on the Ethereum blockchain, which is a public ledger that records every transaction made on the network.
The ether that powers the Ethereum network is used to pay for transaction fees and computational services. Ether can be bought and sold on exchanges or used to purchase goods and services.
It is an open-source platform that anyone can use to create decentralized applications.
XRP (XRP)
XRP is a digital asset that is used to power the Ripple network, a real-time gross settlement system (RTGS) that facilitates international payments. Unlike other digital assets, XRP is not mined but is instead issued by Ripple Labs, the company behind the Ripple network.
XRP can be used to purchase goods and services or to send money overseas. The Ripple network also allows for the exchange of other currencies, including fiat currencies, making it a versatile platform for international payments.
While XRP is not as widely accepted as other digital assets, it has been gaining traction in recent years and is seen as a promising solution for cross-border payments.
Cardano (ADA)
Cardano is a decentralized public blockchain and cryptocurrency project. Cardano is founded on the idea that blockchains can be more than just digital ledgers – they can be used to build commercial-grade applications.
Cardano is being built from the ground up to support this vision and is one of the few blockchains with a research-first approach.
The Cardano project is being developed by a team of experienced engineers and academics, backed by some of the world’s leading investors.
ADA is the native cryptocurrency of Cardano and can be used to send and receive payments on the Cardano network. ADA can also be used to stake Cardano, which helps to secure the network and earn rewards.
Solana (SOL)
Solana is a cryptocurrency that offers fast, secure, and scalable transactions. Using a proof of stake consensus, Solana can process over 65,000 transactions per second. That’s among the fastest existing blockchains!
In addition to being incredibly fast, Solana is also highly secure. The project uses a unique “Proof of History” algorithm to achieve consensus, which is resistant to both quantum attacks and 51% attacks.
Finally, Solana is built to be scalable. The team has created a novel “gossip protocol” that allows the network to process more transactions as it grows. With its combination of speed, security, and scalability, Solana could become the backbone of the new internet economy.
Why is crypto so popular right now?
Cryptocurrency has been gaining in popularity over the past few years, and there are a number of reasons why. One reason is that crypto is seen as a more secure way to store and transfer value, as it is not subject to the same rules and regulations as traditional fiat currencies.
Crypto is also borderless and can be used anywhere in the world, which makes it attractive to investors and businesses. In addition, cryptocurrency is becoming more mainstream as more businesses start to accept it as payment. As a result, crypto is likely to continue to grow in popularity in the years to come.
The benefits of investing in crypto
When it comes to investing, there are a lot of options out there. But in recent years, more and more people have been turning to crypto as a way to grow their money. And it’s no wonder why – crypto offers a lot of benefits that other investments just can’t match.
For one thing, crypto is incredibly volatile, which means that there’s always the potential for big gains because it’s still a relatively new asset class. But at the same time, you need to be aware that you could lose money just like investing in stocks.
And then there’s the fact that crypto is borderless and open 24/7, which makes it accessible to anyone with an internet connection. So if you’re looking for an investment that has the potential to generate great returns, cryptocurrency might be worth considering.
What is blockchain technology?
Blockchain technology is often associated with cryptocurrencies like Bitcoin, but it has applications far beyond that. At its simplest, blockchain is a digital ledger that can be used to record transactions.
Unlike a traditional ledger, which is stored in a central location, blockchain is distributed across a network of computers. This makes it much more difficult to tamper with or hack the data.
In addition, each transaction is verified by the network before it is added to the blockchain, making it nearly impossible to commit fraud. As a result, blockchain has the potential to revolutionize the way we store and manage data. While it is still in its early stages, blockchain holds tremendous promise for the future.
The different ways to invest in cryptocurrencies
Investing in cryptocurrencies can be confusing because there are so many different options.
It can be hard to know where to start when it comes to investing in cryptocurrencies. With so many different options available, it’s easy to feel overwhelmed and unsure of which route is best for you.
We’re here to help! Our guide will walk you through the basics of investing in cryptocurrencies, and show you how easy it can be to get started.
Centralized exchange
A centralized exchange is a type of cryptocurrency exchange that allows users to buy and sell digital assets. These crypto exchanges are typically regulated by financial authorities and require users to complete KYC (know your customer) procedures before they can begin trading.
Centralized exchanges typically offer a wider range of features and services than their decentralized counterparts, but they also come with some risks. For example, because these exchanges hold user funds in central wallets, they are susceptible to hacking attacks.
In addition, centralized exchanges may be subject to sudden shutdowns or other changes in policy that can result in user losses. As a result, it’s important to do your research before choosing a centralized exchange. While these exchanges can offer a convenient way to buy and sell digital assets, it’s important to be aware of the risks involved.
All-in-one exchanges
These are brokerages that allow you to buy crypto, along with other things like stocks and bonds. This type of brokerage is a great option for those who want to diversify their portfolio. And it’s not just for experienced investors; even if you’re a beginner, these brokerages can help you get started.
So if you’re looking to get into the world of cryptocurrency, you may want to give one of these brokerages a try.
Decentralized exchanges
A decentralized exchange is an exchange where users trade directly with each other, without the need for a centralized third party.
Decentralized exchanges are often created on blockchain platforms such as Ethereum or Bitcoin, and use smart contracts to facilitate trades. This means that they are often much faster and more efficient than traditional centralized exchanges.
In addition, decentralized exchanges are much less susceptible to hacks and fraud, since there is no central point of control. However, one downside of decentralized exchanges is that they often have lower liquidity than centralized exchanges.
This means that it can be more difficult to find buyers or sellers for certain assets. Nevertheless, decentralized exchanges offer a number of advantages that make them an appealing option for many traders.
How to invest in crypto through your retirement account
There are a few different ways to do this. One option is to set up a self-directed solo 401(k) and then invest in crypto through that account. Another option is to roll over your existing retirement account into a self-directed IRA. This will give you a lot more flexibility in terms of investment choices, including the ability to invest in crypto.
Finally, you can also set up a new retirement account with a brokerage that offers crypto investing options. Whichever route you choose, make sure to do your research and only invest what you feel comfortable losing.
Costs and fees associated with crypto
When it comes to investing in cryptocurrency, there are a few costs and fees that you need to be aware of.
You’ll need to purchase some cryptocurrency, which can be done through an exchange.
You will also need to pay a small trading fee if you’re looking to buy or sell cryptocurrency on an exchange.
If you’re looking to store your cryptocurrency long-term, you’ll need to find a secure wallet. Some wallets charge a small fee for each transaction, while others charge a monthly or annual fee.
When it comes to cryptocurrency, it’s important to do your research and understand the fees associated with each type of transaction. By understanding the fees, you can make sure that you’re getting the most out of your investment.
Do you need to pay taxes on crypto?
As the popularity of cryptocurrency increases, so too does the number of people wondering if they need to pay taxes on their digital assets. The answer, unfortunately, is yes.
Cryptocurrency is treated as property by the IRS, which means that any gains or losses must be reported on your taxes. However, the way in which crypto is taxed depends on how you acquired it. For example, if you purchased crypto with fiat currency, then you would need to pay capital gains tax on any profits when you sell.
On the other hand, if you received crypto as a payment for goods or services, then it would be taxed as income. As always, it’s best to speak with a tax professional to ensure that you’re staying compliant.
Storing Crypto
When you store cryptocurrency, you are essentially putting your coins or tokens into a digital wallet. There are different types of wallets that offer different levels of security, but all of them essentially work in the same way.
You can think of it like a bank account: you control the funds in the account and can make transactions as you see fit. The main difference is that cryptocurrency is not regulated by any central authority like a government or bank.
This decentralization is one of the key features of crypto that makes it so attractive to investors. When you store your crypto in a wallet, you are essentially entrusting it to the security of the blockchain that it is built on.
The good news is that blockchain technology is incredibly secure, and the chances of a hacker getting in are close to zero. So, if you’re looking to store your crypto safely, a digital wallet is probably your best bet.
The different ways to earn money from your crypto
Earning money from your crypto can be confusing and overwhelming.
With so many different ways to earn money from your crypto, it can be hard to know where to start. You might not even know what some of these terms mean!
We’re here to help. In this guide, we’ll break down all the different ways you can make money from your crypto. We’ll explain what each method is, how it works, and who should use it.
Holding a crypto
If you’re looking to make some extra money, you may want to consider investing in cryptocurrency. Some of the more popular ones include Bitcoin, Ethereum, Litecoin, and Ripple.
Unlike traditional fiat currencies, which are issued by central banks, cryptocurrencies are decentralized and not subject to government interference or manipulation. So, how can holding a cryptocurrency make you money?
If the value of the currency goes up, you can sell it for a profit. Some employers are now starting to offer to pay salaries in cryptocurrency, so holding a currency could give you an advantage (or disadvantage) when it comes to getting paid.
In short, there are several ways that holding a cryptocurrency can make you money. So if you’re looking to invest in something new, cryptocurrency may be worth considering.
Proof-of-stake (PoS) staking vs Proof-of-work (PoW)
In the world of cryptocurrency, there are two main types of transaction validation: proof-of-work (PoW) and proof-of-stake (PoS). Both systems have their own advantages and disadvantages, but PoS has gained popularity in recent years due to its energy efficiency.
With PoW, transaction validators (known as miners) use their computing power to solve complex math problems. The first miner to solve the problem gets to add the next block of transactions to the blockchain and receives a reward in the form of cryptocurrency.
PoW is a very secure system, but it has one big downside: it requires a lot of energy.
In contrast, with PoS, transaction validators (known as stakers) lock up their cryptocurrency as collateral. They then use their computing power to validate transactions and add new blocks to the blockchain. If they act honestly, they receive a reward for their work.
If they act dishonestly, they lose their collateral. PoS is much more energy efficient than PoW, but it does have one downside: it relies on stakers having a “skin in the game.” In other words, stakers need to have something at risk in order to have an incentive to act honestly. However, many people believe that this is a fair tradeoff for the increased efficiency of the system.
Interest-bearing accounts
Interest-bearing accounts in crypto are similar to savings accounts in traditional banking. They allow you to earn interest on your cryptocurrencies by staking them in the account.
The interest rate is usually variable, and you can withdraw your funds at any time. In order to open an interest-bearing account, you will need to have a certain amount of cryptocurrency.
The exact amount will vary depending on the platform. You will also need to choose a duration for your deposit. This can be anywhere from 1 month to 1 year. Once you have deposited your cryptocurrencies, they will begin to earn interest.
The interest payments will be sent to your account on a regular basis, and you can withdraw them at any time. Interest-bearing accounts are a great way to grow your cryptocurrency portfolio without having to do any extra work.
Dividend-earning tokens
Dividend-earning tokens are a type of cryptocurrency that allows holders to earn dividends based on the profits of the company.
For example, a company that issues a dividend-earning token may give holders 1% of the company’s profits each year.
These tokens can be traded on exchanges and often offer a higher rate of return than traditional investments. Dividend-earning tokens are an innovative way to invest in the future of a company and can offer investors a great way to make money.
Lending
If you’re looking for a way to make some extra money, you may want to consider crypto lending. With crypto lending, you can earn interest on your digital assets like Bitcoin and Ethereum.
Here’s how it works: you simply loan your crypto to a borrower and earn interest on the loan. The interest rate is set by the marketplace, so you can earn a decent return on your investment.
Plus, since the loans are collateralized, there is little risk involved. So if you’re looking for a way to generate some passive income, crypto lending might be right for you.
Yield farming
Yield farming in crypto generally refers to the practice of staking or lending cryptocurrency in order to earn rewards. This can be done through protocols that offer staking services, or by lending a native token directly to other users on decentralized exchanges.
The rewards earned from yield farming can come in the form of interest payments, governance tokens, or a share of transaction fees. In order to maximize earnings, yield farmers often move their capital between different protocols to take advantage of changing interest rates and reward payouts.
While yield farming can be a profitable way to earn rewards on your digital assets, it is important to remember that it also comes with some risks. For example, if the value of the cryptocurrency you are staking falls sharply, you may end up losing money. Although, it can be a great way to grow your crypto portfolio without having to do much work.
What are smart contracts in crypto?
In the world of cryptocurrency, a smart contract is a digital contract that is designed to self-execute and enforce the terms of an agreement.
Unlike traditional contracts, which are often written in complex legal language and can be difficult to interpret, smart contracts are written in code and can be executed automatically. This makes them well-suited for transactions involving digital assets, such as cryptocurrencies.
With a smart contract, both parties can be confident that the terms of the agreement will be carried out exactly as intended. In addition, because smart contracts are stored on a public blockchain, they are transparent and tamper-proof.
This provides an additional level of security and guarantees that the contract will be honored. For these reasons, smart contracts are becoming increasingly popular in the world of cryptocurrency.
Cryptocurrency FAQs
People are curious about crypto, but they don’t know where to start.
We’ve compiled a small list of the most frequently asked questions about crypto so you can get started in no time.
Our FAQ section is packed with information about everything from how crypto works to the best wallets for storing your coins.
Which crypto is the best for beginners?
Deciding which cryptocurrency to invest in can be a daunting task, especially for beginners. There are many factors to consider, such as market capitalization, volatility, and liquidity.
With that in mind, here are three cryptocurrencies that are ideal for beginners: Bitcoin, Binance coin, and Ethereum.
Bitcoin is the original cryptocurrency and still the most widely used. It is also the most stable, with a market capitalization of over $100 billion. Binance coin (BNB) is another safe option since it is also one of the largest cryptocurrencies on the market and it runs on the secure binance smart chain.
It is faster and cheaper to transact than Bitcoin, making it more practical for everyday use. Ethereum is a relatively new coin but has already become the second-largest cryptocurrency by market cap. It is used extensively by developers and is supported by a large ecosystem of apps and services.
So, if you’re looking to get started in the world of cryptocurrencies, these three coins are a great place to start.
Which crypto is safest to buy?
When it comes to cryptocurrency to buy, there are a lot of options to choose from. However, not all cryptocurrencies are created equal. Some are more volatile than others, and some have more potential for fraud. So, which crypto is the safest to buy?
Bitcoin is often considered to be the gold standard of cryptocurrencies. It is the largest and most well-known cryptocurrency, and it has a relatively stable price. That said, Bitcoin is still volatile, so there is still some risk involved.
Ethereum is another popular option that is generally seen as being more stable than Bitcoin. However, it is important to note that Ethereum is still a relatively new currency, so there is less data to support this claim.
Ultimately, the best crypto to buy depends on your personal risk tolerance. If you’re looking for stability, then Bitcoin or Etherium may be the best option for you. However, if you’re willing to take on a bit more risk, then other coins could potentially offer more upside.
How do I choose a crypto?
Here are a few factors to consider when making your decision:
First, take a look at the team behind the project. What are their qualifications? Do they have a track record of success? A strong team is essential for the long-term success of any crypto.
Second, examine the technology. Is it well-developed and secure? Does it have the potential for real-world applications? The best cryptos are built on solid foundations and have the potential to change the way we interact with the digital world.
Finally, consider the community around the project. Is there enthusiasm and support from users and developers? A strong community can help to drive adoption and ensure that a project continues to grow over time.
By taking all of these factors into account, you can make an informed decision about which crypto is right for you.
Which crypto is good for long-term investment?
While there are many cryptocurrencies on the market today, not all of them are the best cryptocurrencies to invest in. So, which is the best crypto to invest in for long-term investment? One option is Bitcoin.
While it can be volatile in the short term, Bitcoin has a proven track record and is widely accepted by businesses and individuals around the world.
Another option is Ethereum. Unlike Bitcoin, Ethereum is designed to support smart contracts and decentralized applications. This makes it an attractive option for businesses and developers, which could lead to more widespread adoption over time.
Ultimately, there is no one-size-fits-all answer to the best cryptocurrency. Each investor must conduct their own research on crypto assets and make a decision based on their individual needs and goals.
Do you have to pay taxes on crypto if you don’t sell?
When it comes to taxes, there are a lot of misconceptions about cryptocurrency. For example, some people believe that you only have to pay taxes on crypto if you sell it. However, this is not the case.
In most jurisdictions, any time you realize a capital gain on your crypto holdings, you are required to pay taxes. This includes cases where you trade one type of crypto for another, or use crypto to purchase goods or services.
So, even if you don’t sell your crypto, you may still be liable for capital gains taxes. Of course, it’s always best to consult with a tax professional to determine your specific tax liability. But in general, you should be aware that you may need to pay taxes on your crypto even if you don’t sell it.
Mr. Market (SPY) may be moody, but he is also quite predictable at this time of year. I am talking about getting ready for the Santa Claus rally that is one of the most profitable stretches for investors year in and year out. And this year we have the perfect strategy to add a little more ho, ho, ho to your holiday season. Read the rest below.
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Warren Buffett likes to talk about “Moody Mr. Market” and that investors need to learn how to take advantage of the wild mood swings rather than become a victim of them.
Another thing about Moody Mr. Market is that he tends to act differently at various times of the year. And over time, he has developed some fairly consistent patterns. This means that certain strategies have a higher probability of success when these seasonal trends are in your favor.
It’s The Most Wonderful Time Of The Year…
The best example of this phenomenon is the Santa Claus rally in which stocks outperform at the end of Q4 and start of Q1. Since 1950, this short window has been positive 77% of the time, which ranks it as the No. 1 stretch of seven trading days for stock investing.
Even though the market has recently faced selling pressure following December’s rate hike, a year-end Santa Claus rally certainly isn’t out of the question.
If we’ve learned anything this year, it’s that Moody Mr. Market is as moody as ever.
Following each of the Federal Reserve’s rate increases in 2022, we’ve seen an initial drop followed by a substantial upswing.
Indeed it does seem to be rounding into form just like clockwork this year. We had our last rate hike of the year, followed by a market drop, which means we should have a positive bump in our near future.
That is why I want to share with you the perfect strategy to make the most of this upcoming Santa Claus Rally.
The Right Strategy
The best way to take advantage of these bullish factors is to buy two categories of stocks that these fund managers will prioritize: momentum and deep value.
Momentum stocks are typically companies with accelerating sales and earnings that lead to major share price outperformance. These especially stand out in bearish markets like 2022 as so many other firms are displaying weak results.
Especially in our current economic climate, people are going to be looking for stocks that are still managing to outperform.
On the other end of the spectrum, deep value stocks are ones that have been ignored or forgotten by the market. They are deeply oversold and have very low valuations.
Like a dry tinder box, this means that any sort of spark can send shares rocketing higher. And that spark is often investors focused in Q4 on greatly undervalued stocks that have tremendous promise in the year ahead.
Focus On Stocks Under $10
If you agree that these two categories have the most upside into year-end, then you should consider focusing on low-priced stocks under $10.
Here’s Why…
Low-priced stocks have the most upside in any part of the market and benefit the most from a bullish environment. Additionally, most low-priced stocks either fall into the deep value or momentum categories explained above.
This universe of stocks always offers an incredible opportunity to savvy investors, but that will be even more true this year if we will have a powerful wind at our backs due to bullish Q4 seasonality and the Santa Claus rally.
Earlier, we talked about Mr. Market and how we should take advantage of his mood swings. Well, these stocks under $10 are the best place to find gems that have been unfairly tarnished by Mr. Market’s earlier mood swings, yet ready to shine at this unique time of year.
What To Do Next?
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Meredith Margrave Chief Growth Strategist Editor of the POWR Stocks Under $10 Newsletter
SPY shares were trading at $382.29 per share on Friday morning, down $7.34 (-1.88%). Year-to-date, SPY has declined -18.58%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.
Opinions expressed by Entrepreneur contributors are their own.
If you’re reading this, then chances are you’ll agree: Starting a Web3 business feels daunting and confusing. At least, that’s how I felt when I first started funding my business with Web3 solutions for early-stage crowdfunding. The learning curve felt almost out of reach. My perspective changed, however, after sitting with my friend Metta World Peace — yes, the former Lakers legend who brought home an NBA Championship in 2010. He coached me on how his targeted $1 billion venture capital fund Tru evaluates his portfolio investments.
“There are two types of founders,” Metta told me, the ones who “have the experience and education and then there are the founders that are the visionaries who know exactly where they want to be.” The founders he’s looking to invest in, he says, take calculated risks. “You want to take it step by step, make sure you’re building a good product, test it out before you spend too much money building the wrong tech architecture, and be careful not to blow through your investment money because I’ve seen so many people lose so much money so fast.”
A calculated approach is more than necessary in today’s volatile market. Despite the recent bankruptcy filing by crypto exchange FTX, entrepreneurs are building and innovating in the sector — and why shouldn’t they? The global blockchain market is still expected to be valued at around $67 billion by 2026 according to recent Cornell University research. Even as Bitcoin falls, the total crypto market cap stands around $900 billion, and hundreds of Web3 projects have raised billions in funding. Despite the uncertain economic times, Metta still sees opportunity in this growing and emerging market and he’s investing in blockchain technology projects today as a result.
Not everyone sees it that way though — venture capital investment money has plummeted in half. That’s why many entrepreneurs are turning to alternative funding options in addition to raising venture capital.
1. Raising funds and finding investors
Have you ever invested in a traditional startup or even a crypto startup? Investing in new cryptocurrency projects is highly accessible. Too easy, some might say, so you have to be really careful when using these products. There are many fraudulent new projects in this Industry, so make sure to do your own research before losing money in the attempt to make it.
On the other hand, raising funds for yourself can be easier using crowdfunding tools versus in a traditional finance setting. “Using crowdfunding tools is a new way founders are going about raising money. That’s attractive to founders who don’t have connections to investors, angels or venture capitalists,” Metta explained. In Silicon Valley, for example, raising money from cold emails can be a challenge and often requires a relationship with an investor to get a foot in the door. When you consider the hurdles and obstacles you need to overcome to meet with investors without a preexisting network, in addition to the legal paperwork that goes into term sheets, it can be a lot of hassle to navigate the venture capital world. So many founders are looking to crowdfunding as an alternative to venture capital or in addition to it.
Metta World Peace understands how important crowd-sourcing startups are to the future of Web2 as it enters Web3. Since his unofficial retirement in 2017, Metta has shifted his focus to the entrepreneurial and tech industries, where he is an investor as well as a spokesperson for several startups and small businesses.
For example, Orbiiit Technology is a company in Metta’s investment portfolio where he was an early investor. The company launched a virtual competition called “The Pitch,” which officially launched in late October 2022 and wraps up on November 28, 2022. The competition sets out to find the next up-and-coming unicorn startup founder. Metta is participating in the competition as a startup judge.
Think Shark Tank — but online. Startups compete to win capital and in-kind prizes to help them grow their businesses without losing any equity. Metta judges the contest alongside Orbiiit founder Nader Navabi. Together, they will evaluate the top 10 final contestants, who will be selected through a public online voting process. The first-place winner will receive $25,000 cash and a one-on-one Zoom mentoring session with Metta and the investment committee.
Not everyone can raise funds, however, or compete in “The Pitch,” for that matter — which is why saving and investing could be the way to go.
2. Saving and investing
Many new entrepreneurs get their start after saving, investing and then getting started when their nest egg is ready to hatch. To get ahead, Metta says “you want to get a revenue stream as early on as possible.” Being strategic about the job or side hustle you choose can also set you off on the right path to achieving your entrepreneurial goals.
“Let’s say you’re building a coffee company. Go work at Starbucks to learn their systems, so you can also make some money through a day job. If you want to start a FinTech app, get a job at a VC, start in the mail room. Do whatever you’ve got to do to learn something that can impact your own company in a meaningful way,” he said. “Do this while you’re also gradually saving money to self-finance your business because the more you bootstrap your company the more equity you can hold on to and improve your business,” he continued.
To survive, Metta says, you always need additional money coming in. Selling digital goods is one way to earn passive income to fund your startup, let’s say, for example, you’re selling original IP or you profit on secondary sales by buying low and selling high. “You can also save on payroll by paying your employees in equity, tokens or even NFTs in addition to cash.” Finally, if you’re sitting on digital assets then you can put your money to work by locking them up in decentralized finance platforms to earn yield — but remember to be very careful with the platforms you chose because this option is very risky.
3. Build connections
“Building connections helps founders raise money,” says Metta. “If you don’t have connections it’s going to be hard for you to get the startup capital you need. Web3 gives the opportunity for platforms to decentralize the way the money is raised.”
We live in a highly social world. With so much opportunity, it can be easy to make the right connections if you stay active and do your best to learn more. The most common way that founders go about raising money when they don’t have connections to investors is by bringing on seed investors and advisors who do. For example, in an insular community like Silicon Valley, it is less about how many people you know and more about who you know. You can know few people yet if you know the right people in venture capital those relationships can go a long way. Bringing on an advisor who can make vetted introductions is a common way to get pitch meetings scheduled. Give the advisor a small equity package and they will work hard and long hours to open up their network to help secure valuable pitch meetings.
Even if the investor passes, you can always follow up to ask the investor if they mind making an introduction to another investor friend of theirs who they think might make a better fit. Always research the investor’s portfolio of startups to understand common themes, sectors, and stage of investment fit into that investor’s existing portfolio and what motivates them to invest. Also, remember to keep the dollar value range within their typical check size because if it’s outside their typical range then the chances are higher that they’ll pass.
It’s still early. Good ideas rise to the top. If you have innovative concepts in mind but don’t know how to integrate them into the traditional market, it may be time to get started as an entrepreneur. Who knows, maybe Metta World Peace will invest in your company?
