How to Copy Warren Buffet’s Biggest Investment of 2020

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Warren Buffett is notoriously a good investor. Sure, he’s made some mistakes along the way (who hasn’t?), but whatever move he makes, you can bet he’s thought it through, and it will pay off — big time.

Which is why when Mr. Buffett made his biggest stock purchase of the year into Apple, we thought, “Isn’t it too late to do that?” Apple is already trading at the highest price it ever has. It feels out of reach for us non-billionaires.

But it turns out, that’s not the case. While we don’t have the ability to own $111 billion (yes, billion with a B) in AAPL shares, we can still get our hands on some — and reap the rewards as the market goes up.

One of our favorite ways to get into the stock market and be a part of infamous big-tech returns, without risking billions is through a free app called Stash.

It lets you be a part of something that’s normally exclusive to the richest of the rich — on Stash you can buy pieces of other companies — including Buffett’s choices — for as little as $1.

That’s right — you can invest in pieces of well-known companies, such as Amazon, Google, Apple and more for as little as $1. The best part? If these companies profit, so can you. Some companies even send you a check every quarter for your share of the profits, called dividends.1

It takes two minutes to sign up, and it’s totally secure. With Stash, all your investments are protected by the Securities Investor Protection Corporation (SIPC) — that’s industry talk for, “Your money’s safe.”2

Plus, when you use the link above, Stash will give you a $5 sign-up bonus once you deposit $5 into your account.*

Kari Faber is a staff writer at The Penny Hoarder.

1Not all stocks pay out dividends, and there is no guarantee that dividends will be paid each year.

2To note, SIPC coverage does not insure against the potential loss of market value.

For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

*Offer is subject to Promotion Terms and Conditions. To be eligible to participate in this Promotion and receive the bonus, you must successfully open an individual brokerage account in good standing, link a funding account to your Invest account AND deposit $5.00 into your Invest account.

The Penny Hoarder is a Paid Affiliate/partner of Stash. 

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk. 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

Is Now a Good Time to Buy a House?

So you’re at the point in your life where buying a home is not a question of if, but when. You’re scrimping. You’re saving. You’re dreaming of walking through the front door of your very own home.

But as the decision draws near, you start questioning everything. Is now a good time to buy a house? Or is this the worst time? Is it more financially responsible to buy a house right now or wait? And what if you mistime the market, buying too soon or too late, and miss out on lower home prices?

Ultimately, the experts say the answer is less about economies, markets and pandemics and more about you.

So, how do you think through this decision? You’ll want to take time to thoroughly review your personal financial situation and life goals. At the same time, you’ll need to gain some understanding of the market dynamics that impact home costs.

External factors can make buying a house right now intimidating, but your personal finances are an important factor.

This process will take some time, but it’s well worth the effort. With a firm grasp on your personal situation and some context on the housing market, you’ll be able to confidently go forth knowing you’re making a fiscally informed decision about whether to buy a house right now.

Honestly assess these aspects of your finances

Financial security is always important if you’re trying to determine when you’re ready to buy a home. To decide if now is a good time to buy a house, ask yourself the following questions about your finances:

How secure is your income?

Job or income stability is an important factor if you are buying a home in a rocky economy, such as the one triggered by the coronavirus pandemic, says real estate economist Gay Cororaton. Even in a robust economy, your income security should be top of mind when you’re thinking of buying a house right now.

If you have any inkling that your position may be eliminated or that you’ll be making a career change, you may want to delay buying a home. Even a recent break in employment that caused you to draw down some of your savings may raise a red flag with lenders, says Kate Ziegler, a real estate agent with Arborview Realty in the Boston area.

If you’re considering buying a house right now, you should avoid opening any new lines of credit right before purchasing a home.

– Jeff Tucker, senior economist at Zillow

Do you have enough money saved?

After income stability, savings is the next-most-important financial factor you’ll want to consider to determine if now is a good time to buy a house, Ziegler says. The old rule of thumb was to save 20% of the price of the home for your down payment. While that is ideal, it’s not necessary—far from it, Ziegler says. In fact, it has become more common for first-time buyers to put down much less than 20%.

How much house can you afford?

The down payment is one side of the affordability coin. Your monthly mortgage payment is the other side. You need to know how much you can spend on both to determine if you can afford to buy a house right now, says Jeff Tucker, a senior economist at Zillow. Aim for a monthly mortgage payment that doesn’t stretch you too thin—experts typically put this at around 28% of your monthly gross income, according to Bankrate.

With those guidelines, you can determine what you can afford. For example, if you make $4,000 a month, you should typically spend no more than $1,120 on your monthly mortgage payment in total.

How much house that buys you depends on multiple factors: mortgage rates, property tax rates, homeowners insurance and—if you don’t have the savings to put down 20%—primary mortgage insurance, or PMI. To get a rough estimate, plug your income details into an online calculator. For a more specific figure, talk to a local lender and get pre-approved for a mortgage, Ziegler says.

If you're buying a house right now, aim for mortgage payments around 28% of your monthly gross income.

Once you know your price range, you can determine how much savings you need in the bank to buy a house right now. You’ll also need to have money saved for closing costs, which vary but typically run 2% to 5% of the loan amount, according to Bankrate.

Again, Ziegler recommends talking to a lender to really understand what your individual down payment and closing costs would be. Finally, be sure to add a line item in your budget for home maintenance that will inevitably pop up after you move in. Whether it’s a dishwasher on the fritz or a leaky roof, you don’t want to be caught off guard, so be sure to save money for emergency home repairs.

How is your credit?

Your credit profile is also important to lenders, and it will likely be a factor in what interest rate you’re offered. Given that, you should be checking your credit report and know your credit score before investing in a home. If you’re considering buying a house right now, you should avoid opening any new lines of credit right before purchasing a home, Tucker says.

What is your debt-to-income ratio?

Another factor lenders check is your debt-to-income ratio, or DTI, Tucker says. This is the percentage of your gross monthly income that goes to paying monthly debt payments, plus your new mortgage. Lenders typically require this ratio to be 45% or less but prefer it even lower—in the 33% to 36% range.

Have you considered the opportunity cost?

Another financial consideration when deciding if now is a good time to buy a house is the opportunity cost of delaying a home purchase, Ziegler says. If you’re renting in a market where the rent is higher than your would-be monthly mortgage payment, you may be spending a lot more money each month than if you were to purchase a home. And of course, with a mortgage, your monthly payment increases your equity.

After taking a clear-eyed look at your income, savings and these other financial factors, you will have a better sense of when you’re ready to buy a home and whether now’s the time for you to dip into the market.

Consider key market factors

Next, take a look at factors that are outside of your control, but still influence your purchase: prices, interest rates and national employment trends.

Where are housing prices?

As you’re looking at the market, one of the biggest considerations when you are ready to buy a home will be housing prices and availability. Research your local market by talking to real estate agents who work specifically in the area where you want to buy and asking them about market trends, Ziegler says.

Track current listings and recently sold prices to get a sense of how prices look today. Generally, the tighter the inventory—meaning the fewer houses available—the higher prices will be, Tucker says.

If you're trying to determine when you are ready to buy a home, track current listings to get a sense of how prices look today.

What’s going on with interest rates?

When you’re ready to buy a home could also depend on another major economic factor: interest rates. When interest rates are low, your housing budget is effectively supercharged, Tucker says, and you can afford a more expensive house because you’re spending less on interest. When they are high, the opposite is true.

This is what compels people to buy when interest rates are low—you get more for your money. If you get a 30- or 15-year fixed-rate mortgage, you lock in that rate for the entire life of the loan, which could save you money now and into the future, Tucker says.

How does employment look nationally?

Finally, if you want to get a general idea of where the housing market may be headed—if prices will drop or rise soon—check out the national employment trends, Cororaton says. Low unemployment means prices will generally trend upward because more people can afford houses, boosting competition and prices, she says.

But if unemployment is inching up, then people are losing jobs and will be more likely to remain in their current homes. As a result, there tends to be less competition for them, lowering prices.

You don’t need to be an expert in the market to determine if now is a good time to buy a house, but a baseline understanding of these big-picture forces can give you the confidence you need to embark on your home-buying journey.

So when are you ready to buy a home? Paying attention to big-picture economic forces can help you decide.

Think about your future plans

After reviewing your savings and income and assessing the market conditions, take a step back and think about your life plans over the next few years. Your lifestyle and goals will help determine whether now is a good time to buy a house.

“For buyers who are not certain whether they will still be living in the same place in three or five years, I would caution against locking themselves into a certain location,” Ziegler says. “If they’re just not sure what the future holds, it may be better to have that flexibility.”

It’s unlikely in many markets that you will see substantial financial gain from homeownership if you move within five years, Ziegler says. Your equity gains will likely be offset by the transaction costs of buying and selling your home.

That goes for remote workers, too. Are you working from a home office these days? While widespread remote work may allow buyers to consider homes farther from their offices, ask yourself: Is my company going to permanently allow employees to work from home? Do I think there will be other remote opportunities in the future?

Is now a good time to buy a house? That depends on your lifestyle and long-term goals.

While you’re thinking about the next three to five years of your career, also consider the next three to five years of your personal life. Will you have a family? Will that family grow?

These can be weighty topics, so be sure to think them through on your own schedule. Buying a house is a big decision, and it’s not one to be rushed. By taking the time to assess your life, from your job security to your financial health to your lifestyle, and considering the impact of market factors, you’ll have a clearer sense of when you are ready to buy a home.

If you’ve decided that buying a house right now is the best decision for you, it’s time to learn more about how it will impact your budget. Get started by reading up on these eight unexpected expenses when buying a home.

Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

The post Is Now a Good Time to Buy a House? appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com

Should You Keep Investing At All-Time Highs?

A note from a dedicated reader inspired today’s article. It’s a question about the stock market and investing at all-time highs. It reads:

Hey Jesse. So, back in March you said that you were going to keep on investing despite the major crash. Fair enough, good call!

Note: here and here are the two articles that likely inspired this comment

But now that the market has recovered and is in an obvious bubble (right?), are you still dumping money into the market?

Thanks for the note, and great questions. You might have heard “buy low, sell high.” That’s how you make money when investing. So, if the prices are at all-time highs, you aren’t exactly “buying low,” right?

I’m going to address this question in three different ways.

  1. General ideas about investing
  2. Back-testing historical data
  3. Identifying and timing a bubble

Long story short: yes, I am still “dumping” money into the stock market despite all-time highs. But no, I’m not 100% that I’m right.

General Ideas About Investing

We all know that that investing markets ebb and flow. They goes up and down. But, importantly, the stock market has historically gone up more than it has gone down.

Why does this matter? I’m implementing an investing plan that is going to take decades to fulfill. Over those decades, I have faith that the average—the trend—will present itself. That average goes up. I’m not betting on individual days, weeks, or months. I’m betting on decades.

It feels bad to invest right before the market crashes. I wouldn’t enjoy that. But I’m not worried about the value of my investments one month from now. I’m worried about where they’ll be in 20+ years.

Stock Market Crash GIFs | Tenor

Allowing short-term emotions—e.g. fear of an impending crash—to cloud long-term, math-based thinking is the nadir of result-oriented thinking. Don’t do it.

Don’t believe me? Here’s a fun idea. Google the term “should I invest at all-time highs?”

When I do that, I see articles written in 2016, 2017, 2018…you get it. People have been asking this question for quite a while. All-time highs have happened before, and they beg the question of whether it’s smart to invest. Here’s the S&P 500 data from 2016 to today.

S&P 500 – Past five years. Punctuation my own addition.

So should you have invested in 2016? In 2017? In 2018? While those markets were at or near all-time highs, the resounding answer is YES! Investing in those all-time high markets was a smart thing to do.

Let’s go further back. Here’s the Dow Jones going back to the early 1980s. Was investing at all-time highs back then a good idea?

I’ve cherry-picked some data, but the results would be convincing no matter what historic window I chose. Investing at all-time highs is still a smart thing to do if you have a long-term plan.

Investing at all-time highs isn’t that hard when you have a long outlook.

But let’s look at some hard data and see how the numbers fall out.

Historical Backtest for Investing at All-Time Highs

There’s a well-written article at Of Dollars and Data that models what I’m about to do: Even God Couldn’t Beat Dollar-Cost Averaging.

But if you don’t have the time to crunch all that data, I’m going to describe the results of a simple investing back-test below.

First, I looked at a dollar-cost averager. This is someone who contributes a steady investment at a steady frequency, regardless of whether the market is at an all-time high or not. This is how I invest! And it might be how you invest via your 401(k). The example I’m going to use is someone who invests $100 every week.

Then I looked at an “all-time high avoider.” This is someone who refuses to buy stocks at all-time highs, saving their cash for a time when the stock market dips. They’ll take $100 each week and make a decision: if the market is at an all-time high, they’ll save the money for later. If the market isn’t at an all-time high, they’ll invest all their saved money.

The article from Of Dollars and Data goes one step further, if you’re interested. It presents an omniscient investor who has perfect timing, only investing at the lowest points between two market highs. This person, author Nick Maggiulli comments, invests like God would—they have perfect knowledge of prior and future market values. If they realize that the market will be lower in the future, they save their money for that point in time.

What are the results?

The dollar-cost averager outperformed the all-time high avoider in 82% of all possible 30-year investing periods between 1928 and today. And the dollar-cost averager outperformed “God” in ~70% of the scenarios that Maggiulli analyzed.

How can the dollar-cost averager beat God, since God knows if there will be a better buying opportunity in the future? Simple answer: dividends and compounding returns. Unless you have impeccable—perhaps supernatural—timing, leaving your money on the sidelines is a poor choice.

Investing at all-time highs is where the smart money plays.

Identifying and Timing a Bubble

One of my favorite pieces of finance jargon is the “permabear.” It’s a portmanteau of permanent and bear, as in “this person is always claiming that the market is overvalued and that a bubble is coming.”

Being a permabear has one huge benefit. When a bubble bursts—and they always do, eventually—the permabear feels righteous justification. See?! I called it! Best Interest reader Craig Gingerich jokingly knows bears who have “predicted 16 of the last 3 recessions.”

Source: advisorperspectives.com

Suffice to say, it’s common to look at the financial tea leaves and see portents of calamity. But it’s a lot harder to be correct, and be correct right now. Timing the market is hard.

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.

Peter Lynch

Predicting market recessions falls somewhere between the Farmers’ Almanac weather forecast and foreseeing the end of the world. It takes neither skill nor accuracy but instead requires a general sense of pattern recognition.

Note: The Farmers’ Almanac thinks that next April will be rainy. Nice work, guys. And I, too, think the world will end—at least at some point in the next few billions of years.

I have neither the skill nor the inclination to identify a market bubble or to predict when it’ll burst. And if someone convinces you they do have that skill, you have two options. They might be skilled. Or they are interested in your bank account. Use Occam’s Razor.

Just remember: some permabears were screaming “SELL!” in late March 2020. I’ve always heard “buy low, sell high.” But maybe selling your portfolio at the absolute market bottom is the new secret technique?

“But…just look at the market”

I get it. I hear you. And I feel it, too. If feels like something funny is going on.

The stock market is 12% higher than it was a year ago. It’s higher than it was before the COVID crash. How is this possible? How can we be in a better place mid-pandemic than before the pandemic?

Crazy Pills GIFs | Tenor

One explanation: the U.S. Federal Reserve has dropped their interest rates to, essentially, zero. Lower interest rates make it easier to borrow money, and borrowing money is what keeps businesses alive. It’s economic life support.

Of course, a side effect of cheap interest rates is that some investors will dump their cheap money into the stock market. The increasing demand for stocks will push the price higher. So, despite no increase (and perhaps even a decrease) in the intrinsic value of the underlying publicly-traded companies, the stock market rises.

Is that a bubble? Quite possibly. But I’m not smart enough to be sure.

The CAPE ratio—also called the Shiller P/E ratio—is another sign of a possible bubble. CAPE stands for cyclically-adjusted price-to-earnings. It measures a stock’s price against that company’s earnings over the previous 10-years (i.e. it’s adjusted for multiple business cycles).

Earnings help measure a company’s true value. When the CAPE is high, it’s because a stock’s price is much greater than its earnings. In other words, the price is too high compared to the company’s true value.

Buying when the CAPE is high is like paying $60K for a Honda Civic. It doesn’t mean that a Civic is a bad car. It’s just that you shoudn’t pay $60,000 for it.

Similarly, nobody is saying that Apple is a bad company, but its current CAPE is 52. Try to find a CAPE of 52 on the chart above. You won’t find it.

So does it make sense to buy total market index funds when the total market is at a CAPE of 31? That’s pretty high, and comparable to historical pre-bubble periods. Is a high CAPE representative of solid fundamentals? Probably not, but I’m not sure.

My Shoeshine Story

There’s an apocryphal tale of New York City shoeshines giving stock-picking advice to their customers…who happened to be stockbrokers. Those stockbrokers took this as a sign of an oncoming financial apocalypse.

The thought process was: if the market was so popular that shoe shines were giving advice, then the market was overbought. The smart money, therefore, should sell.

I recently heard a co-worker talking about his 12-year old son. The kid uses Robin Hood—a smartphone app that boasts free trades to its users. Access to the stock market has never been easier.

According to his dad, the kid bought about $100 worth of Advanced Micro Devices (ticker = AMD). When asked what AMD produces, the kid said, “I don’t know. I just know they’re up 60%!”

This, an expert might opine, is not indicative of market fundamentals.

But then I thought some more. Is this how I invest? What does your index fund hold, Jesse? Well…a lot of companies I’ve never heard of. I just know it averages ~10% gains every year! My answer is eerily similar.

I’d like to believe that I buy index funds based on fundamentals that have been justified by historical precedent. But, what if the entire market’s fundamentals are out of whack? I’m buying a little bit of everything, sure. But what if everything is F’d up?

Closing Thoughts

Have you ever seen a index zealot transmogrify into a permabear?

Not yet. Not today.

I do understand why some warn of a bubble. I see the same omens. But I don’t have the certainty or the confidence to act on omens. It’s like John Bogle said in the face of market volatility:

Don’t do something. Just stand there.

John Bogle

Markets go up and down. The U.S. stock market might crash tomorrow, next week, or next year. Amidst it all, my plan is to keep on investing. Steady amounts, steady frequency. I’ve got 20+ years to wait.

History says investing at all-time highs is still a smart thing. Current events seem crazy, but crazy has happened before. Stay the course, friends.

And, as always, thanks for reading the Best Interest. If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

7 Ways to Invest in Real Estate Without Buying Property

This page may include affiliate links. Please see the disclosure page for more information. How do many wealthy people get that way? They invest in real estate. It is a proven way to build wealth. 90% of millionaires became so through owning real estate. So said famous industrialist (and billionaire) Andrew Carnegie. Yet only 15% of Americans…

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7 Ways to Invest in Real Estate Without Buying Property was first posted on March 11, 2020 at 6:00 am.
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How To Get Free Stock: 10 Companies That Will Give You Free Shares

There are quite a few ways to get free stock. This article will look at 8 companies that are offering free shares and cash bonuses to new investors.

The post How To Get Free Stock: 10 Companies That Will Give You Free Shares appeared first on Bible Money Matters and was written by Lorraine Smithills. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

Source: biblemoneymatters.com

How To Buy Stocks As Gifts (And Why They’re The Perfect Present)

This holiday season, don’t give a traditional gift. Instead, learn how to buy stocks as gifts and reward your recipients financially.This holiday season, don’t give a traditional gift. Instead, learn how to buy stocks as gifts and reward your recipients financially.

The post How To Buy Stocks As Gifts (And Why They’re The Perfect Present) appeared first on Money Under 30.

Source: moneyunder30.com