Category Archives: Investing Basics

How To Invest Without A Lot Of Money

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“It takes money to make money.” You’ve no doubt heard that phrase thrown around before. It’s a phrase that unfortunately stops people from investing before they even start. The idea that you need to have a lot of money before you’re able to invest (and make more) is all too common, and it’s simply not true.  Years ago when you needed a financial advisor at a big brokerage firm, and you had to pay them insane commissions in order to trade this may have been true. But now, the internet is your savior! You don’t need a financial advisor at all! Thanks to the internet, it doesn’t matter if you have $100, $1000, or $10,000. You can invest and get your money working for you no matter who you are. A couple of assumptions before we continue with this post…I’m assuming that A) you don’t have a mountain of debt hanging over … Continue reading →

2013 Maximum Contribution Increasing For 401(k) and IRA

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Savers everywhere, rejoice! The IRS has given us a gift for 2013. The maximum contribution limits for the 401(k) and Roth IRA are increasing! This means we’ll all be able to stash away just a little bit more tax advantaged cash in the upcoming year. Here’s what’s changing: 2013 401(k) Maximum Contribution: For 2013 the maximum contribution you can make to your 401(k) account will be $17,500. This is up just a touch from the $17,000 limit in 2012, and up a full grand from the $16,500 limit that we were stuck with between 2009-2011. Remember, your employer’s matching contributions to your 401(k) don’t count against the $17,500 limit. Only the contributions out of your paycheck count against the limit. It also doesn’t matter if you contribute to a standard 401(k), a Roth 401(k) or both. It’s $17,500 no matter how you want to split it. To find what percentage … Continue reading →

The Retirement Plan For The Lazy Man

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It was recently brought to my attention that not everyone likes to spend countless hours pouring over their 401(k)’s and IRA’s looking for the absolute best investments. Shocking! I know! I learned of this strange type of person just last week when I received an email from a friend asking for some advice on his 401(k). He sent me a list of the funds his 401(k) plan offered and asked me what he should invest in, with the caveat that he didn’t want to have to pay attention to it. He has zero interest in doing anything but contributing money out of his paycheck and getting on with his life. At first I was taken aback. Someone who doesn’t want to spend a lot of time managing their 401(k)?! I guess I had read about people like this before, but like a supermodel or rock star, never thought I’d actually … Continue reading →

Investing Basics: Covered Calls

 
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In a recent post I made mention of covered calls without really explaining much about them. I got a few emails asking if I could elaborate, so here we go… What Is A Covered Call? A covered call is an options strategy that can be used by investors in order to generate more income on shares of stock they own or to cut down on the risk they’d be exposed to if the share price fell. Simply put a covered call is a contract between two investors for the right (not the obligation) to buy 100 shares of stock at an agreed upon price any time before the expiration date of the contract. Example:  You own 100 shares of stock ABC that you bought for $20/share. You then decide to write (sell) a call option on the stock at a strike price of $25 and an expiration date of six months. The … Continue reading →

Investing Basics: Market Cap

 
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Market Cap (short for “market capitalization”) is one of the most widely used terms you’ll hear when stocks are being discussed. Open your favorite finance website or turn on the financial news and you wont be able to escape it. Yet many beginning investors don’t exactly know what market cap is, or why it’s important to their portfolios.   Definition Market cap is simply the value of all of a company’s outstanding shares of stock. To put it another way, market cap is the price you would have to pay to buy every share of outstanding stock in a company. You can calculate a company’s market cap by multiplying its share price by the total number of shares.  Using the example of Exxon Mobil from above you’d multiply $86.31 x 4.71 billion to get its market cap of 406 billion.   Importance of Market Cap Market capitalization is such an … Continue reading →

Investing Basics: Earnings Per Share (EPS)

 
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In my first post on investing basics I explained the P/E Ratio and how it’s used to help determine if a stock is a good buy or not. Based upon some feedback received from that article, I guess I should have started this series off with what I’m going to write about today: Earnings Per Share (EPS). Definition Earnings Per Share is one of the most widely used statistics to value a stock. It’s also one of the most important. Simply put, a company’s earnings per share reflect the portion of a company’s profit allocated across each share of stock outstanding. It’s a quick and reliable indicator of just how profitable a company is. This is obviously important information because generally the more profitable company is, the more attractive it is as an investment. Calculated Earnings per share is calculated as Net Income divided by total shares outstanding. Earnings Per Share … Continue reading →