7 “Dave Ramsey Baby Steps” to Achieve Financial Freedom

Business Man Enjoying Financial Freedom

Want to achieve ultimate financial freedom? Finance guru Dave Ramsay has 7 simple steps that’ll help you get out of debt and get started on your journey to worry-free independence today.

Whether you’re one of Ramsey’s top listeners and number one fans, or you’ve never heard of the guy and are just looking to better balance your finances and build up some wealth, these tips will help you get started.

Who is Dave Ramsey?

Dave Ramsey is a widely respected financial expert and money management, guru. He’s a household name in the USA as far as business and investments are concerned. On his popular website, he describes himself as “America’s trusted voice on money and business” – and with an amazing “rags to riches” backstory behind his belt, we at Investoralist tend to agree.

By the time he was just 26, Ramsey had established a multi-million dollar real estate empire. In the late 1980s, however, he was forced to declare bankruptcy and had to rebuild his life from the ground up – something he achieved by creating Dave Ramsey s Baby Steps.

Dave Ramsey has dedicated his life to helping others achieve financial freedom. Over the years, he’s built businesses, shaped brands and established a huge fan following on US radio stations with millions of listeners.

He’s also authored several best-selling books, like Financial Peace, The Total Money Makeover and Dave Ramsey’s Complete Guide to Money – as well as set up the Financial Peace University (FPU), a widely-used initiative that helps people pay off debt.

How Can Ramsey’s 7 Baby Steps Help Americans?

Living in the amazing US of A doesn’t come cheap and few people are lucky enough to live a debt free life.

There’s no doubt we’ll all face a number of financial challenges during our lifetime. From expensive mortgage payments and raising money for a comfortable retirement, to saving for your children’s pricey college education and just keeping up with the bills, there’s a lot to stay on top of in everyday life.

That said, we think Dave Ramsey s 7 baby steps can work some real miracles, helping people to get out of debt, rise above financial limitations, consumer debt and wealth barriers and achieve more financial independence and control. Let’s take a look at how the 7 steps work.

The 7 Dave Ramsey Baby Steps Explained

So, what are the 7 steps? And what can Americans do to get started today? Let’s take a look in closer detail, one at a time (or baby step by baby step).

Baby Step 1 – Save $ 1 000 for Your Emergency Fund

Between credit card debt, mortgage payments, everyday living costs and other outgoings, the average American simply does not have enough spare money to shell out in the event of a financial emergency – and this can be a real problem.

What to do: For baby step 1, Dave Ramsey recommends setting aside a small amount of money each month to kickstart an “emergency fund” as early as possible in life.

Right now, it probably seems unrealistic to save up enough spare cash to cover 6 months of expenses at the drop of a hat, but by building up a $ 1 000 reserve sooner rather than later, most Americans can get started with bettering their personal finance today, improving their ability to control an unpredictable situation in the near future.

How to make it work: If $ 1 000 sounds like a lot of money, think small to make it work. Selling old belongings on sites like eBay or Amazon, eating out less and downloading specialized money saving apps to help you monitor your spending can help you build up that $ 1 000 reserves faster than you might think!

Make sure to opt for a savings account that pays the highest possible interest on your stored-away money, too – as this can greatly help to ensure that your emergency fund builds up super-fast, putting you in a much better situation as far as finance is concerned.

Baby Step 2 – Pay Off All Debt (Except the House) Using a Debt Snowball

Of all the steps in this list, baby step 2 is one of the most ambitious – but that doesn’t mean it’s not achievable. After all, we’re talking about tried and tested techniques created by the man behind the Financial Peace University here!

If you’re following the steps in order, you should already have a $1,000 emergency fund set up by now and be beginning to realize that taking back control of your finances is easy if you take baby steps.

What to do: For baby step 2, Dave Ramsey recommends using what he calls the “debt snowball method” to start paying off each and every debt to your name one by one, little by little. This involves imagining your debts as a snowball rolling down a hill, starting off small but gathering more snow (or debt) as it rolls.

How to make it work: Using this debt snowball idea and applying it to each debt you have on record, you can pay off smaller debts first, add the freed-up cash to the minimum payment of the next debt, and so on. Now, the snowball method certainly takes some practice, but once you’ve started using the debt snowball in day-to-day life, it’s easier (and faster) than you’d expect to start making a big difference to your finances. Will baby step 2 pay off? We certainly think so.

Baby Step 3 – Save 3 to 6 Months of Expenses in a Fully Funded Emergency Fund

Once you’ve waved goodbye to all that debt, it’s time to save, save, save. Your starter emergency fund you set up in baby step 1 should have already helped you save $ 1 000 (if not more, if you’ve been smart enough to use a savings account that gains plenty of interest).

From now on, you need to supercharge those savings to enable you to control 3 to 6 months of expenses in the event of an unforeseen personal finance emergency.

Now, as we’ve seen with COVID-19 and the recession of 2008, unprecedented world events that can take a serious toll on your finances are far from uncommon – and almost never predictable. This is why it’s absolutely essential to ensure you’ll fall on your feet in times of crisis, whether that crisis be a lost job or a national emergency.

What to do: In baby step 3, Dave Ramsey advises single-income families to aim for the “six months of expenses” mark – which can be reduced to “3 months of expenses” for dual-income households, if needs be. That said, it’s always best to aim higher.

How to make it work: One way to achieve this is to normalize an attitude of saving in your day-to-day life. Use money saving apps as much as possible, track your spending on Google Docs and try to better your targets month-on-month, eat at home as much as you can and be sure to raid those coupon books at every given opportunity. Oh, and be sure to use a high interest rate savings account again!

Baby Step 4 – Invest 15% of Your Household Income in Retirement

With the average American working until they’re 66 years and two months old, saving for retirement is often the last thing on most people’s minds – but Dave Ramsey thinks that this attitude needs to change.

What to do: Baby step 4 is all about abandoning that “tomorrow’s problem” mentality and putting at least 15% of your household income aside each month to help finance your later years in a comfortable way. After all, with 66 years of work behind your belt, you’re going to want to relax!

Once paying off debt has become a thing of the past, there are a number of ways you can supercharge your retirement savings.

How to make it work: Baby step 4 recommends closely scrutinizing your employer’s 401(k) and completely maxing-out the amount of contributions you can deposit into this fund. In most cases, you should be able to drop in up to $18,500 per year of your own money but using Roth IRAs could help to boost this by $5,500.

If you’re a bit more ambitious – which you should be – you can also follow the principles of best-selling other and finance guru Chris Hogan, who advises savers to set a Retire Inspired Quotient (R:IQ), which is a kind of savings and retirement age target that Americans can work towards using Chris Hogan’s intuitive retirement calculator.

Just like with other savings accounts, having targets, goals and ambitions and visualizing what you need to do and how much you must save to achieve them can work wonders, as can using Roth IRAs.

Baby Step 5 – Save for Your Children’s College Fund

That’s right – baby step 5 is also all about saving! But this time Dave wants you to save big to help fund a debt free college education for your children.

Now, obviously if you have no children and are simply aiming to accumulate wealth for yourself, or yourself and your partner, you can skip this one out. But with average undergraduate tuition fees in the US ranging anywhere from $17,797 to $26,261, putting some money aside for your children’s college education is absolutely vital if you don’t want to end up burdened with credit card debt and other debt when your kids hit their teenage years. Unless you’d rather see them saddled with student loan debt for years to come?

What to do: It goes without saying that we all want the best for our kids and one way to achieve baby step 5 is to open an Educational Savings Account (ESA) or a 529 college savings fund, depending on which feels like the best fit.

Contrary to popular belief, it’s entirely possible for your children to bag a college diploma or degree without breaking the bank.

How to make it work: Save as much as you can from as early as you can and consider in-state and community college options with lower average fees to save yet even more money in this area.

Dave advises savers to follow baby step 4, baby step 5 and baby step 6 simultaneously – but be sure to initiate each step in the proper order to achieve ultimate freedom and control.

Baby Step 6 – Pay off Your Home Early

Outside of credit cards, car loans and regular household bills, mortgage payments are pretty much the top debt most Americans are dealing with on a day-to-day basis.

Recent estimates suggest the average US citizen shells out around $1,400 per month on mortgage payments. But the thing about buying a home is, once you’ve made all of those payments, that real estate is 100% yours. Forever.

While it might seem like pie in the sky thinking today if you’ve only just stopped renting and found your feet on the property ladder, it’s nowhere near impossible to pay off your home – it just takes a bit of strategizing and dedication.

What to do: Use refinancing options in your favor, save wisely and there’s no reason why you can’t shave valuable years off of your mortgage-paying life.

Maybe you could switch from a 30-year to a 15-year mortgage and take a second job to make the repayments, or perhaps your home has increased in value, enabling you to refinance onto a much better deal.

How to make it work: Dave’s top tip for baby step 6 is to make one additional mortgage payment in each quarter. This enables you to pay off your home faster using the extra cash you’ve managed to save by studiously following all the other steps.

Over the course of an average mortgage, just one extra quarterly payment could get you 11 years closer to financial independence, saving you upwards of $60k in interest payments in total!

Baby Step 7 – Build Wealth and Give

Now, by this point you should be very familiar with the fact that Dave Ramsey is all about giving and sharing, so it should come as no surprise that baby step 7 wants you to give, give, give!

Once you’ve managed to fully succeed with baby step 1 to 7, debt is a thing of the past and you’ve no more house payments or credit card bills holding you back, Dave suggests you start thinking about generosity.

What to do: After having worked so hard that you’ve achieved ultimate financial control and independence, you can start sharing that extra cash with friends, family members, charities or even your local church – and start helping others to accomplish their dreams too.

How to make it work: Baby step 7 can be initiated using a combination of everything you’ve learned so far. Max out those Roth IRAs, that 401(k) and those retirement fund contributions to help your wealth grow in a snowball method style.

Then simply kick back and enjoy the beautiful feeling of easy generosity – i.e., “build wealth and give”, as Dave would say.

Achieve Full Financial Control and Freedom with the 7 Steps Today

So, we’ve shared the knowledge – now it’s time for you to put these steps into action.

We understand that it can be quite a journey to go from saving an initial emergency fund of $ 1 000 to ramping up your retirement fund savings for baby step 4.

It can take even longer to pay off your home for baby step 6 and eventually achieve ultimate financial control for baby step 7.

Nevertheless, we believe in you and we know you can master all steps – even that confusing debt snowball baby step!

With a bit of hard work and perseverance, Dave Ramsey himself has proven that virtually anyone can give themselves the total money makeover, pay off all debt and better balance their finances. The trick is not to expect miracles overnight. After all, they’re not called “big steps”, are they?

How Do I Start a Dave Ramsey Plan?

The key to success with Dave Ramsay s 7 baby steps is to follow each strategy slowly, in order and – most importantly – one at a time. We understand that despite their baby-ish name, these steps still appear intimidating at first glance, which is why you need to break your ambitions down into manageable, budgetable goals that work for you. As Dave would say, take one baby step at a time.

We’d recommend using money-saving apps or Google Docs to create a sensible budget, then simply following each baby step sensibly and slowly, without outdoing yourself.

How Do I Make Smarter Investments?

Here at Investoralist, we’re all about making investments easy. Ramsey s 7 baby steps are a great way to get started on your investment journey, but there are many other things you can do to improve your finance situation, from investing in stocks and shares, to trying out tax tips, venture capitalism and more.

Browse our diverse range of investment blogs and articles and make smarter investment and personal finance decisions today.

How to Generate $1,000 Per Month in Dividends

Business Man With Hands and Coins From a Dividend Stock

The dream of all investors is to build an investment portfolio capable of generating a regular and sustainable income per year or even per month. But, achieving this is easier said than done. Even with the advent of advanced research tools and improved services from investment advisors, there is no assurance that your money can earn as much as you want it to be.

In this article, investors like you will learn what you need to do to earn $1000 a month. Also, we will demystify the concept of dividend stocks to make sure that you get all the necessary information in making the right investment decisions. Lastly, we tell you how much money you need to prepare before you have a portfolio that is giving you regular money per month.

What are DIVIDEND STOCKS?

The term “dividend” refers to an amount of money given by a company to its shareholders of its profits on a regular basis. Since each of the shareholders owns a piece of the company, they get to take a slice of the profit as well. It is the company’s sole prerogative to determine the number and the value of each dividend it wants to give to its shareholders.

In the case of investment, the term “dividend stocks” refers to the share of the investors of a company’s profits paid on a regular basis. This share may be paid monthly, quarterly, bi-annually, annually, or in rare conditions, in a lump sum. Also, it may come in the form of cash or additional stocks.

How DIVIDEND STOCKS work?

Most dividends are paid in cash. The investor is paid a certain amount of money based on the number of shares he owns. For example, if a company pays 1 dividend for $100, investors with 100 shares will be paid at $10 000. Since dividends are often given regularly, you can expect $10 000 of income on a regular basis.

Another way dividends are paid is in the form of stocks. They are in the form of percentages. For example, if a company issued a 10% stock dividend, an investor who owns 200 shares will have 220 shares after the dividend is given. To turn this into cash, you will have to sell the stocks you own.

Take note that there is no guarantee that you will receive a dividend. The decision to give out dividends is based on what the board of directors of the company has agreed upon. This setup is different from owning a bond where a bond investment earns a fixed-rate income called the “coupon rate.” When it comes to a dividend, the board of directors has the prerogative to reduce the dividend or remove it altogether.

Why Do People Invest in Dividend Stocks?

While there is no guarantee that investors can receive dividends immediately, a lot of people continue to do dividend investing because it can be a profitable investment for the future. We list some of the best reasons why investing in Dividends gives you the best investment options

Regular Stream of Income

Retirees choose to invest their retirement fund in dividend stocks, knowing that they will receive a dividend every month in the future. While they may not get a return on investment (ROI) immediately, their retirement money can give them a regular stream of funds in the future.

Invest while you’re Young

Dividend investing has also become an option for young people because, with the stock dividends option, they get to own more stocks, reinvest it now, and then cash in stocks they have gained in the past years. One important reminder, though, even if you choose to reinvest your dividends, they are still taxed in the same year that you got them. Tax-exemption is only applied to accounts like an individual retirement account.

Secured Investments and Returns

Compared to bonds and mutual funds, dividends gain higher yields when the interest rates are low. Dividends also has the potential for share price appreciation. Meaning, even if the stock market or the share price falls, dividends can survive because of their steady income. If you decide to reinvest the additional dividends you earned, you will have more shares per dividend because of the lower share price.

How to Find the Best Dividend Stocks?

Despite the numerous advantages of dividends, it is not free from market instability and risks. Investors must also be careful in choosing which shares to buy to make sure that their dividends earn a profit. People must look for a dividend portfolio with a high dividend yield. Below are tips on how you can find the best stocks in the market.

1. Look beyond dividend yield

A lot of beginner investors are lured when they see high dividend yields. They believe that buying dividends with high returns or yields guarantees their financial success. But in reality, yields or return is not the bottom line. There are many other factors to consider, including interest rates, fees and expenses, compound interest, market volatility, and more.

For one, you must look at the sustainability of the stock prices. You need to know the history of the stock you are being and the company you are buying it from. Remember that companies can make dividends appear profitable by increasing the yield. As an investor, you have to look for trustworthy companies with established history and reputation.

Also, pay attention to the sector and structure where your investment belongs to. Take note that despite the high yield of your investment structured as real estate investment trusts, they are taxed higher. This means that you must also pay attention to other factors and not only the dividend yield. It is best that you set a realistic goal, so you do not get disappointed in the end.

2. Recognize red flags

As mentioned above, the yield is not the bottom line of dividends. Consider some discrepancies on the yield as warning signs. Here is an example. If a company has a high dividend payout ratio but took debt to pay the dividend, the company is most likely experiencing financial troubles. Instead of paying attention to the yield of the stocks, check if the company has strong balance sheets or has an efficient cash flow.

Also, do not start investing unless you have seen the performance of the company in the past years. If a company faces financial trouble, the dividend investors will surely suffer. Avoid small business companies that have not proven their performance in the market. If you can, choose companies with a good record in the past 30 years or so.

Most importantly, do not be lured by companies assuring you of earning $1000 a month immediately after creating your funds. Any seasoned investor would tell you that earning a regular and sustainable income from dividends takes time. Instead of trying to get as much as $1 000 a month during your first year as an investor, try to grow your shares each month or per year first. It is only through this slow and certain way that you can ensure your income from investments.

3. Diversify to minimize risk

To assure a high return on investment, combine your high-yield stocks with growth stocks. It is risky to invest in growth stocks because it has a high-win high-lose scheme. To balance it out, spend on stocks that have more conservative growth. By doing so, you are making sure that you do not lose everything on a single investment.

Also, try not to pour your investments into one sector or industry. While the technology and communications sector have high yields in recent years, it is not wise to focus on it alone. If the sector experiences a crash, you could lose big. Try to diversify your investments by including other industries like real estate in your portfolio.

Moreover, you need to understand how factors like rising rates, inflation, consumer spending, company balance sheets, and many more affect your investment. As an investor, you can only set your goal if you have the essential information about funds, expenses, income, risk tolerance, and more. Without understanding the stock market data, you cannot get started in building your income portfolio.

How Much Money Do I Need to Invest to Make $1,000 a Month?

So, the million-dollar question is: how much do you need to invest to earn $1 000 a month? If you have a high-yield investment, you might need at least $100 000 invested in your dividend portfolio to make $1 000 per month. In most cases, where the stocks only have moderate growth or yield, you might even need to invest $200 000 to make $1 000 per month.

Income investments of one hundred thousand or more can be overwhelming for many. Do not worry, though, because you do not have to put in these investments all at once. Get started by putting in the money based on your available funds. When you earn stock of cash dividends, put your earnings back into your portfolio. By doing so several times in a decade or so, you will be able to grow your investment exponentially.

When it comes to the stock market, it is best to think of it as a long term investment. It is not a get-rich-quick scheme where investment can make you a millionaire overnight. Instead, it is meant for people willing to take long term waiting. One has to wait several years or even several decades before being able to own a big sustainable investment portfolio.

Final Words

Investing in dividends to earn $1 000 per month can be a challenging feat. You need to spend time, money, and effort before you can expect $1 000 a month regularly coming into your income portfolio. If you are a beginner, you may want to learn basic concepts of stock market investing first before putting all your savings into a single investment. Do not expect 1000 a month of return just yet. Instead, make your goals attainable.

Also, new investors are often lured by unrealistic claims of investment companies and advisors, like 1 000 a month income during the first year of investment. Instead of trying to achieve these extraordinary feats, investors must pay attention to the details of their investment and the mechanics of how their money is earning money. They must read the terms, agreements, privacy policy terms, interest rates, fees, to name a few, before putting their entire retirement savings into investment accounts.

This article is a product of extensive research by the Investoralist team. If you feel that you need more information about dividends, stocks, bonds, and other related topics about investing, the Investoralist team has more articles to help and guide you. We have written materials dedicated to helping out investors who do not have prior knowledge and experience about the trade. Our materials are guaranteed to guide you in navigating the investment industry.

How to Calculate Earnings Before Interest and Taxes (EBIT)

Businessman puts wooden blocks with word EBIT

Wise investors prioritize a business’s stability, profitability, and sustainability before deciding to buy shares. The best way to do this: review the business’s annual income generation. 

However, a company that makes enormous yearly income that grows steadily per year is a great choice. It’s easy to fixate a business’ ongoing interest rates and taxes with the problematic picture they present investors.

Experienced investors calculate earnings before interest and taxes (EBIT) to see the “raw” operation costs. Known as revenue minus expenses excluding tax and interest, you may also know EBIT as operating earnings or income, operating profit, and profit before interest and taxes.

It’s like a magnifying glass that looks deep beyond the capital systems and taxes a business faces to see their core operation’s income and expense flow. 

In doing so, investors have the clearest picture of their true operating costs, allowing them to make an informed decision based on hard data supporting a business’s likelihood of sustainability and profitability.

What Is Earnings Before Interest and Taxes (EBIT)?

We all aspire to run our businesses someday. It’s essential to calculate amounts we earn before interest and taxes to know the time period we’ll need to scale our business through future equipment investments, branch openings, and more. 

EBIT calculations make it easy to clear out unnecessary details, allowing us to see the full picture of our business’ monetary flow and total profitability. Investors aspire to help your business expand and become much more profitable than before. 

However, they’ll want to know one thing: the total income you have before you deduct the loan and other financing interest rates you’re still paying. In doing so, they can assess your performance transparently.

How Do You Calculate for EBIT?

EBIT calculations include the raw materials businesses use to manufacture their goods or render their services. Any item that the business processes, combines, or develops into useful, branded products EBIT calculations consider as cost of goods sold (COGS).

To perform their processes, business establishments have numerous expenses, including the following:

  • Utilities
  • Equipment maintenance
  • Equipment repairs
  • Employee wages
  • Additional knowledge ventures (seminars, review courses, etc.)
  • Other non-financing and tax-related costs. 

You can calculate a business’ EBIT if you have the following information:

  • Total Profit
  • Cost of Goods Sold (COGS)
  • Net Profit
  • Interest Expense
  • All taxes the business handles

How to Calculate EBIT Based on Total Revenue

Businesses always record their most accurate calculation to ensure their EBIT calculations are accurate as possible. Additionally, accountants make sure to have every operating earnings and expense figure correct too. 

Using total revenue, they use the following EBIT calculation:

EBIT = Revenue – COGS – Operating Expenses

The formula might seem simple, but most annual profit, non-operating income, COGS, and operating expenses have more than ten figures inclusive of decimals. 

However, the calculation is straightforward and simple, allowing investors to calculate multiple businesses’ financial performances.

Here is a sample calculation to show it in action:

Business’ Profit: S $7,000,000 yearly

Total COGS: S $3,000,000

Operating Expenses: S $1,000,000

EBIT = S $7,000,000 – S $3,000,000 – S $1,000,000

EBIT = S $3,000,000 before interest and taxes

How to Calculate EBIT Based on Net Income

In some cases, you encounter the opposite figure. The business readily has its net income before interest and taxes (hence the name).

For this, the formula looks like the following.

EBIT = Net Income + Interest + Taxes

This bottom-up calculation uses available net income statement and then adds the current interest in any financing and taxes the business is currently handling. 

For investors, EBIT shows the full picture of a business’ cash flow for a single year and determines the accuracy of net profit calculations, interest expense, operating profit, cost of goods sold, and overall company’s profitability.

Here is a sample calculation to show it in action:

Net Income: $ 5,000,000 yearly

Interest: Paid $ 500,000 for ongoing loan

Taxes: Paid S $850,000 (based on the 17% Singapore corporate tax rate)

Earnings Before Interest and Taxes: S $5,000,000 + S $500,000 + $850,000

EBIT = S $6,350,000

Why Does It Help to Calculate Earnings Before Taxes (EBT)?

EBT focuses on the total gross profit a business has accomplished in a specific period. Its formula is as follows:

EBT = Revenue – COGS

It helps calculate this figure to give investors an idea about the business’ overall profitability using sales as its yardstick. Its significant difference with the EBIT formula is the lack of operating costs in the equation. 

Sales revenue before tax allow investors to evaluate any company’s performance without cluttered tax rates and other unnecessary elements.

EBIT Isn’t The Same as Operating Income

Operating income is different from EBIT and EBT. It focuses on isolating the total operating costs versus the business’ gross income. In doing so, investors have a clear picture of a business’s operating efficiency, which the EBIT formula, EBT, and EBITDA cannot illustrate effectively.

To calculate operating income, you can use the following formula:

Operating Income = Gross Income – Operating Costs

Income reports completely detail a business’s operating income and EBT, which signifies transparency and reliability for many investors. Truthfully, business owners can suffer massive penalties for inaccurate income reports involving operating income. 

The fines are hefty enough to drive them to bankruptcy and eventual liquidation.

Calculating Break-Even EBIT

EBIT is an investor’s tool to learn about a business’ profitability through their income before adding in taxes and interests. Break-even EBIT is a figure allowing them to discover the impact of different financing plans on the business, which you can measure through earnings-per-share (EPS).

Any business’ goal is to have a higher EPS than its previous evaluation, allowing EBIT to grow higher than the break-even EBIT value. Having a higher than break-even EBIT value than before makes them much more appealing to future investors.

To calculate this value, you can use the following formula:

Break-Even EBIT: (EBIT – Interest Expense) x (1.0 – Tax Rate Formula)/Equity Number of Shares

EPS is a benchmark giving business owners insight about their overall market value if they’re a publicly-listed business. Therefore, a higher EPS is highly likely to attract substantial investors and encourage existing investors to take up more available shares in the process.

The formula deducts interest from EBIT. Then, you can derive your tax rate formula by dividing income tax expenses by your earnings, which we can illustrate in this equation:

Tax Rate Formula = Income tax expenses/ earnings or gross income

Lastly, the equity number of shares is your business’ total or estimated number of shares from private investors. 

These values change daily, but the average value of equity shares in a particular period gives you a “snapshot” value of break-even EBIT, allowing investors and business owners to find the best options.

The Major Differences Between EBIT and EBITDA

Depreciation & amortization are two factors businesses accrue that affect their gross earnings and overall profitability. They have a significant effect on earnings before interest and taxes.

For clarity:

Depreciation: The total value an asset or business loses over time

Amortization: A business’ cost to run and maintain versus its usefulness or overall profitability

Investors use EBITDA to determine the business’s possible future profitability. Wise investors make sure they’re spending money on companies with long-term sustainability. 

The business’ facilities, equipment, and employee knowledge, experience, and education affect depreciation and amortization.

We can sum it up in this formula:

EBITDA = Operating Income + Depreciation + Amortization

Truthfully, no method exists to improve depreciation and amortization except to invest in new facilities, equipment, and personnel once both factors reach their critical point. 

For business owners, a good rule of thumb is to change their equipment once the repair or maintenance costs have gone beyond 50% of the total value of a new, upgraded equipment version.

EBIT Limitations

EBITDA is an improved EBIT formula because it removes both depreciation and amortization from the equation. A normal EBIT equation always includes depreciation in revenue values. 

By removing both depreciation and amortization, investors have a clearer picture of the overall business performance based on operating costs and actual earnings alone.

The biggest mistake beginner investors make is viewing only the ongoing high debt and taxes the business is paying concerning their profit.

However, with EBIT, they get the total income and profit-generating capacity of a prospect business independent of their debt, taxes, depreciation, and amortization values.

Truthfully, a business’s profitability relies greatly on the cost of goods sold and operating costs, which the EBIT calculation already achieves. 

However, some investors and accountants find it better to remove both depreciation and amortization to reveal a prospect business’ “purest” profit value. In doing so, investors can make an objective and fully informed decision.

All Investors Use EBIT Calculations To Make The Best Investment Decisions

As an investor, learning a business’s overall capital structure should play a huge role in your investment decisions. These equations are useful to prevent investors from relying heavily on trends, especially for short-term investors looking to make immediate profits. 

Riding on trends became many investors’ profit loss actions. With proper data, you can make the best decisions that remove debt, taxes, depreciation, and amortization. Doing so allows you to see the tools and resources at the business’ disposal to recover and create lasting value once again.

How to Invest in Vanguard S&P 500 Index Fund

Invest in Vanguard S&P500 Index Fund

Engaging with investments can sometimes be worrisome especially whenever you are not sure about what index funds are in the first place. Understanding how these things work can get confusing most of the time, especially for the average investor.

There are plenty of index funds and investment opportunities out there in the market, but the question always remains: what type of fund should I put my investments on?

Let’s talk about what Vanguard Index funds are, how you can engage with it, what are its types and differences, and how you can make the smartest of decisions as you place in your financial investments.

What are Vanguard Index Funds?

To start with, index funds are categorized under a mutual fund where tons of investors pool their money so that they can buy some shares in a fund that mirrors a market’s benchmark index (hence the term “index” fund). One of the popular examples for this type of fund is the S&P 500 index fund.

John Bogle was the person who launched this type of fund around 1976, and was considered as a radically different investment approach in the market. These types of funds tried to simply match and mimic the rise and fall of the economical market, the movement of sectors and various industries, as we all paved more opportunities for typical Americans to gain more access in investing in stocks and other investor shares.

This approach was also considered to be simple, as it only required “passive” investing. Investors have proven to themselves that doing so makes it more profitable for them as compared to “active” investing! The reasons behind this is that (1) index funds usually require lower fees, which saves more money for investors in the market; and (2) markets usually rise relatively over time. Now, as a result, investors now have a preference to build money through passive mutual funds such as Vanguard (also known as VFINX).

How do Vanguard Index Funds Work?

Vanguard’s goal is to create some sort of index funds by purchasing securities that cover the likes of companies throughout an entire stock index. They are also targeted to particular sectors, companies, or firms, or groups — in different or the same parts of the world. How this works is that individual investors buy investor shares of the fund that builds their interest through time, and, in turn, serves as investment returns.

Vanguard also offers index funds to investors that mimic the bond markets (they do this by selling and buying both corporate and government financial debt). Because of this, Vanguard is considered an investment with lower weighted index risks in the long term, albeit with smaller returns.

How to Invest in a Vanguard S&P 500 Index Fund?

In order to purchase the Vanguard S&P 500 Index fund, you should be able to buy shares from the fund companies directly (usually at their website).

The steps are quite easy:

1) Go to the Vanguard website, and open an account. Be sure to provide all identification documents required, and make sure all needed information from you have been submitted and are complete.

2) Pick on your account of choice. This can either be a joint account, a retirement account, or an individual account. After which, you will be asked to provide some financial information to complete your account profile.

3). You’re set! Fund your chosen account through making an electronic deposit to the Vanguard companies, or through a traditional mailing of your check.

Here are some crucial tips that you will need to consider as you invest in a Vanguard S P 500 index fund:

  • The minimum investment needed for the S P 500 Index Mutual Fund is $3,000.00. This can be at $2,000.00 if you are investing through an educational savings account.
  • Additional investments on the index fund inv can be made as small as 100 bucks.
  • To lessen the hassle, you can link your bank account to the company for future, automated purchases and exchange-traded funds.
  • You can fully customize your account to favor your investment interests. For example, you can opt to have capital gains and/or dividends reinvested into your additional shares inside the fund.

Pro tip: Before engaging in investments, it is crucial to reflect on how much you are willing to risk, given the number of yields and returns. Knowing about your financial choices for instance being a retirement plan participants will reflect on the decisions on the account you will be creating online, the type of Vanguard shares you will be buying, and the expenses you will be shelling out as you move along. If you are seeking consultation and more relative information about these large blend mutual funds and stocks share prices, you can ask their bank brokerage professionals.

How Much Does It Cost to Buy Vanguard S&P 500 Index Fund Shares?

An average 500 Index Fund investor would usually make an initial and a primary minimum investment that typically ranges between $3,000.00 to $10,000.00, along with annual costs and share prices to maintain their money market fund. The expenses on top of their investments are usually called the expense ratio.

It is important to note that there are two main types of Vanguard index funds that are optional for the average individual investor’s preference. The differences between the two would revolve around how much your initial investments would be, and the annual fees that come along with them. Let’s take a closer look into the two:

1) Admiral Shares

The minimum investment for admiral shares can range from $3,000.00 to $100,000.00 and may have an average expense ratio of 0.11% market cap. Initially, the account minimum was at $10,000 but was changed down to $3,000 across 38 index funds.

2) Investor Shares

The initial minimum investment for investor shares are relatively lower than admiral shares and ranges from $1,000 to $3,000. They, however, have a higher expense ratio of 0.18%.

There is also some alternative to both investor and admiral shares which is by buying a Vanguard exchange-traded fund (ETF). You won’t have to carry any minimum investment, and you can sell and buy funds just like stocks in the stock market.

What Are the Best Vanguard Index Funds?

1) Vanguard 500 Index Fund (VFIAX)

This type of fund is one of the first types of Vanguard products. It is also known as the Vanguard S P 500 index fund, giving the average investor exposure to 500 of the largest companies in the United States. This comprises 75% of the total value of the stock market in the country.

The minimum investment for this is at $3,000 and with an expense ratio of 0.04%

2) Vanguard Total Stock Market Index Fund (VTSAX)

The second type of index fund is one that has coverage on the entire equity market which includes small to large-cap growth as well as value stocks.

The minimum investment for this is at $3,000 with an expense ratio of 0.04%

3) Vanguard Total Bond Market Index Fund (VBTLX)

If you would like to get exposed in investment-grade bonds, allocating 70% in government bonds and 30% in corporate bonds.

The minimum investment for this is the same as the previous funds but with an expense ratio of 0.05%.

4) Vanguard Balanced Index Fund (VBIAX)

As the term implies, the investment for this type is balanced for about 60% on stocks and around 40% on equities, giving stability through the use of investments with a fixed income. The expense ratio for this is higher, at 0.07%.

5) Vanguard Growth Index Fund (VIGAX)

This growth index fund takes a hold on sectors with the largest growth potential. The sectors include consumer services, the financial services industry and the tech industry. 

The expense ratio for this is usually at 0.05%.

6) Vanguard Small Cap Index Fund (VSMAX)

This type of fund takes an approach on smaller businesses and companies that are publicly listed. This is to help them diversify their investment experience in the stocks, away from larger public U S companies. 

The minimum investment for this is at 0.11%

7) Vanguard Total International Stock Index Fund (VTIAX)

The last type of fund is one that covers industries across the globe, particularly developed and emerging markets. It has an indexing investment approach as well, which tracks stock market performance and index fund investor shares across the globe. 

The expense ratio for this is at 0.11%.

Final Thoughts

When it comes to the stock market, net assets and mutual fund investments, it is important to be wise about the things you put your money one. Investment advisors would suggest that you should have fund managers to consult with, especially on a large capitalization on your part. 

With this, Investoralist, a website that can help you with your personal finances, is a place where you could get the latest news and data on the stocks, various broker dealers, your retirement plan, or even the mutual fund in itself.

Investoralist can give you data on everything you need to know to manage your personal finances wisely. Be sure to visit their website today!

Posted in ETF

3 Best Fidelity Stable Value Fund For Smart Investors

Investing in Fidelity Stable Value Fund

When it comes to talks on investment, nobody wants to be ill-informed. We all want to be smart and well-aware about where we invest our funds, especially as future retirement plan participants. With this, stable value funds have been designed to exist in the market, in order to help us keep ahead of inflation and market volatility.

Now, to stay smart, we would want to choose which type of stable value funds we would want to invest in, and all these come along with a wide array of risks and fees. All you have to do is to choose which among the best stable value funds out there will suit you best.

But what are stable value funds? How do they work, and how do I know which among these will fit my needs? Let’s talk about all these in this article.

What Is a Stable Value Fund?

In a nutshell, stable value funds are one of the various investment options you can choose from in the money market funds today. These money market funds options focused on preserving the capital and investment objectives you put into. Because of this, a stable value fund keeps the value of your cash in the markets regardless of the performance of the stock and the bond markets.

Consequently, the returns are low for this, because the risks are low as well. While some financial management professionals and tenured investors would consider that an SVF is similar to a money market fund, you will have to understand that stable value funds still yield higher interest rate returns than a money market fund and some other stock plan company in the market, and without having to add on more risks.

How Stable Value Fund Works?

Stable value funds are investments offered by insurance companies, stable value investment associations, and banks. They are designed to be wrap contracts or fixed-income securities, as they assure investors a certain amount of return, even if the value assets’ performances decline in the market.

Now, to support that assurance of returns, a wrap balance contract enters the picture. Wrap contracts are those that are reliant on the associated asset value as well as the financial backing provided by the wrap issuer (in this case, the issuers may be banks and insurance companies).

To guarantee your return, it is crucial to know that your money balances should never have worth that is lower than your principal investment in the fund. With this, the bank or insurance company that offers you the wrap will assure you of small percentages of a return–regardless of the performance of the economy. Now, if the fund loses incredible value, the insurance companies and the banks will have that responsibility to complete and make it whole for you.

As it has been mentioned earlier, you will have to remember that just like any other investment in the market, stable value funds come with a risk, albeit a small amount. For example, if your insurance company goes bankrupt and starts to shut down, their bankruptcy will have some sort of impact on your investment strategy and stability.

3 Best Fidelity Stable Value Fund

There are different types of fidelity investments that come with different investment requirements and an array of risk levels. Let’s discuss the top three:

1. Fidelity Balanced (FBALX)

FBALX or Fidelity Balanced is an investment that is considered the highest-rated type of funds in the group of Fidelity funds. Choosing to invest in this keeps you ahead of inflation with a competitive margin. Because of higher yields, the FBALX comes with a rather moderate level of risk balance, as it may not be considered as the most stable among the three in this lineup.

Logic will tell you, however, that the higher the risks you take, the higher the possible yields. The FBALX is one of the best options you can choose with regards to yields and its relation to risks. Keep in mind that the financial portfolio for FBALX is a combination of about 1/3 bonds and 2/3 stocks in the market.

Possible Expense for FBALX: $56.00 per annum, every $10,000 invested

Minimum Investment Requirement for FBALX: $2,500.00

2. Fidelity Freedom Income (FFFAX)

The second type of Fidelity fund is called a Fidelity Freedom Income, and with an acronym of FFFAX. This will suit best those who are conservative with their investments and would prefer company funds with low volatility in the market.

As compared to FBALX funds, the FFFAX has an asset allocation of 1/4 stocks, 1/4 cash, and 1/2 bonds. This is below the average for the income funds set for retirements such as a 401 k, and the allocation of cash is mere twice the category preservation average.

The FFFAX always maintains itself on the conservative side of the funds spectrum. Because of this, the preservation yields come in with an average long term return, but it performs with risks that are below the average. It can guarantee a return after a 10-year investment period of 4%. This means that the FFFAX can beat ahead against inflation on your funds while it maintains the stability its shareholders require.

Possible expense for FFFAX: 49$ per annum for every $10,000 invested

Possible minimum investment for FFFAX: $2,500.00

3. Fidelity Government Income (FGOVX)

If you are those types of investors that settle in with stability while at the same time have a good fund management portfolio and are into investing in high credit quality bond funds, then a Fidelity Government Income (also known as FGOVX) will work best for you.

The stock portfolio of the Fidelity Government Income is comprised of a balance in blend agency bonds (such as GNMA bonds or even Fannie Mae bonds) and U.S. treasury bonds. 98 percent of the mentioned bonds have been qualified with an AAA rating, which performs a lot higher above the average (which is 80%).

The average period for all the bond holdings in this category has been proving itself valuable when interest rates have been rising yet again because long-term bond funds are more sensitive to the interest rate. On the other hand, a short term bond fund might find it challenging to stay competitive in the midst of inflation.

Possible expense for FGOVX: $45.00 per annum for every $10,000 invested

Minimum investment for FGOVX: $2,500.00

How Much Are Stable Value Fund Fees?

When it comes to looking and committing to stable value funds and contribution plans, always check on those that charge relatively small and strategically competitive fees. A stable value fund would usually charge only 0.5% or smaller, and that percentage is already considered as a fair charge. If your stable value funds start to charge you with fees of 1.0% or higher, then be wary because they can consume your already-low yield return.

The fees that you can expect from a stability fund may revolve around the following:

  • Internal Expenses or Expense Ratio (this is also known as your operating expenses in the fund).
  • Investment advisory Expense or Investment Management Expense (an expense you pay the person who manages your fund in the money market)
  • Transaction Expenses (the fee you pay each time your order to buy or sell your stable value funds).
  • Front-End Load (commission charges that may possibly reflect into your account)
  • Surrender Charges, or Back-End Load (charges each time you sell your fund from your account)
  • Custodian Fee or Annual Account Fee (regular annual fee that may be charged on your account).

When Stable Value Funds Are a Good Fit

Stable value funds will be a good fit for you and your 401 k contribution plans if you are a conservative investor and would like to invest exclusively in GICs or Guaranteed Investment Contracts. These stable value investment association contracts are those issued by 401 k insurance or retirement plan providers that guarantee you, as the investor, some sort of yield and return.

Know that because a lesser risk is involved with stable value funds, a lower return should be expected. But if you are a worker who is nearing your retirement, or if you would simply want to have stability in your portfolio– especially amidst times of market volatility and crises, then a stable value fund would be a perfect fit for your investments and 401 k.

Bottom Line

Always keep in mind that you will have to be well-informed and smart with your stock investments. With this, it is important to do your research and refer to professional institutions like Investoralist that can help you not just with information on your stock investments and retirement plans, but also with your assets and the risk that you would like to use in investing.

Stable value funds are indeed beneficial in the long haul, especially if you are an employee excited for your nearing retirement period in life. If you would want to diversify your financial stock portfolio and gain some sort of stability and security with your cash and finances with a low level of risk, then these types of funds and securities in the market would suit people like you best.

Step-by-step Guide on How To Buy on Stock At Fidelity

Guide on Buying and Selling Stocks on Fidelity

Fidelity is steadily growing as one of the top-performing and most-accessible indexes for many investors all over the world. While it hasn’t reached the heights of the S&P 500 and Nasdaq Index, it serves as an excellent platform for traders from all walks of life thanks to its no-load mutual funds and profitable indexes.

Surely, you’ve found this article to learn all about buying stocks and getting in Fidelity’s highly-profitable action. Before we dive in, let’s learn more about Fidelity’s offerings for investors, aside from its virtually risk-free service.

What Is Fidelity Bond?

Fidelity isn’t a bond or any other investment vehicle. It’s a steadily-growing investment company in Boston, Massachusetts. Fidelity Investments, which recently shortened its brand name to Fidelity, offers excellently-priced index funds, stock ETF, no-load (meaning zero commission fee) mutual fund, and even retirement plan services for its American arm only.

The no-load mutual funds and affordable index funds propelled Fidelity into popularity first in America. Then, it became a worldwide phenomenon helping many active traders find success and profit with its wise investment tips and conveniently-accessible trades third party fund management and trading platform.

The Different Types of Fidelity Bonds Available

Fidelity investments offer an enormously-wide range of tools and investment vehicles to the point it can be daunting to find the perfect one for your investment style. Here are three wide-sweeping categories to help you narrow down the ones that work for you.

1. Fidelity Actively-Managed Funds

Like other actively-managed funds, Fidelity’s variety is run by dedicated active traders or fund managers focused on beating a relative index in its national market. Naturally, actively-managed funds have higher risk appetites and have an in-depth focus on index funds.

Truthfully, we all have yet to see another fund — including Fidelity’s actively-managed funds — to try and beat the S&P 500 or Nasdaq. However, the beat-top-performers objective helped yield great profits for investors with a high-risk appetite.

2. Fidelity Index Funds

The investment company’s index funds are the same ones you’ll find from other investment companies and online brokerage. They’re a collection of high-performing, high-yield stocks with top-ranked performances in the previous months or years.

The major difference: Fidelity offers them at low cost and better prices, even if you’re using their Active Trader Pro service when trading fidelity mutual funds, stock ETF, or index funds.

To refresh you: index funds are pre-selected funds in any index. For example, the S&P500 index fund uses the S&P 500’s index, meaning if you purchase an S&P500 index fund, you have a number of fractional shares in every company included in the S&P 500’s index.

3. Fidelity Balanced Funds

The safety vehicle of all risk-averse investors, mutual or balanced funds are like index funds. However, it has more versatility and diversification than index fund investments. To recap: mutual funds have a collection of top-performing stocks offset by money-saving bonds and high-performing currencies. Truthfully, it’s a multi-market fund (minus futures trading/secondary market trading)

For long-term investors with modest objectives, Fidelity also offers brokerage balanced funds are the best choice. Without any major economic incidents, most fidelity mutual or fidelity balanced funds deliver their promised profit, even if it takes decades of investing in fidelity brokerage.

Step by Step Guide to Start Buying Stocks on Fidelity

Fidelity.com has its respective trading platform and fidelity s mobile smartphone app. Whether you’re an Active Trader Pro user or otherwise, you can buy stocks, invest in exchange-traded funds (ETF), or perform asset allocation conveniently any time you have an internet connection via the mobile app. No limit orders per share of investments on each mobile app account.

You can expect Fidelity to make their investment mobile platform extremely user-friendly for new and experienced mobile or online brokers, investors, and traders. Additionally, it has real-time monitoring tools accessible from any computer for your online trades, fees, orders, and portfolio.

Here’s a Step-By-Step Guide to Help You Purchase Your First Fidelity Investment

1. Choosing The Perfect Index to Buy

It’s easy to open a Fidelity taxable brokerage account. Upon heading to their website, you can fill up a quick form asking for your name, address, and another account crucial information, such as your nationality and total income. Fidelity has its own bank account or virtual wallet cash-in, making it easy for registrants to become traders or brokers and invest quickly.

Your risk appetite determines the indexes you’ll find useful or valuable in all your investments. For example, the S&P 500 guarantees great returns thanks to its long-term buy trend of successes and investing history. However, things can go south fast if an economic anomaly or unforeseen bubble bursts in the USA. Indexes do not have safeguards during bear economies, but they are much more tax-efficient than balanced/mutual funds.

2. Fill Out The Order Form

At this point, you’re an active trader, and you’ll be filling out the order forms regularly. With Fidelity, the top-right corner button called “Trade” is your key to accessing the trade order form. You’ll be asked for your transaction type, then select “indexes.” Alternatively, you can select other transaction types, such as stocks/ETFs, mutual funds, and others.

The Action pulldown menu asks you if you’d like to buy or share transaction types or investment vehicles you wish to own or possess. The Quantity menu asks you to enter the number of indexes and shares you’d like to own.

3. Order Type has two menu items: Market Vs. Limit and Bid-Ask.

Market: Default market order to buy an index ETF

Limit: Buy an index ETF when it hits a certain price

Time in Force is when the purchase will take place. “Day” is the immediate execution of your stock market order. You can set your purchase to begin by the next day or a specific date. This feature is handy to limit orders and if you anticipate prices can get higher when the stock markets open the following day or in the coming weeks.

4. Preview and Finalize Your Order

At this point, you can now preview and finalize your orders. On this screen, you can check for missing or erroneous details. If you find them, you can press your browser or the app’s return function, allowing you to correct these details before you click the submit option.

Virtually every available platform has a preview order feature, which financial technologies have lately adopted. Fidelity’s order form is clear and easy to digest, making it easy to spot errors and make changes if you ever decide to buy a different quantity or set a different order type.

5. Submit, Trade and Repeat

Once you’re done, submit the form and wait for an email receipt. You’ll see your activity on the Activity/Confirmation Tab screen to see if your submit order pushed through. Additionally, the Activity/ Confirmation Tab gives you data about your other activities on Fidelity’s platform or app.

You’ll need to repeat this process during stock trading. The app and platform cannot perform actions without your consent. All your purchases are upon request of you, and the app does make sure you know it with the preview order and Activity/Confirmation tab.

Guide to investing in stocks on fidelity

New to and Nervous About Investing? Follow These Steps!

We can’t blame you if you feel that investing in index funds and mutual fund is complex and possibly difficult. However, if you are nervous, we’ve got detailed plan and options to help you learn about proper investing practices and ideas. With confidence, you can make the necessary adjustments and acquire the best skills and expectations that will suit your investment appetite.

1. Detail Your Investment Plan

Because stocks, ETFs, and indexes have created a great deal of investment returns and success stories, plenty of noise about “making your money work for you” through short-term positions exist. It’s crucial to remember this: no get-rich-quick formula ever exists. Short-term positions can give you some profit if you have the time of day to observe your investing trading trends and patterns, which is a fund manager and stock broker’s job.

A detailed, long-term investment portfolio and trades plan work well for day traders because it allows you to purchase indexes and other investment vehicles with your retirement or emergency fund in mind. Always remember that your investment objectives, such as having money for retirement, your children’s college fund, or paying off your property mortgage, will affect the smallest details of your investment plan and portfolio.

2. Holding Positions and Objectives

Short-term positions have one goal: make profit quickly. Unfortunately, traders aren’t full-time fund managers. You go to work to earn the money to fund your positions. Therefore, you can’t make money work for you by working your money (if that statement makes sense).

Fidelity and other investment platforms make it possible to trade everywhere. However, if you don’t have an objective and think you can get rich in the short-term, you need a better objective. Long-term objectives, such as retirement, educational funds, or children’s inheritance are the best objectives for stock market investing.

3. Risk Tolerance

The risk/reward rule goes like this: the higher your risk, the higher your reward. Alternatively, the higher you risk, the bigger you lose. When trading — even with Fidelity.com — it’s wise to keep in mind that risk is always present. It might be low, but it’s never zero.

Mutual funds offer the best balance between risk and reward. It will not reach the heights indexes and ETFs can reach, but it will shelter your profits through any bad day. If you’re a high-risk appetite investor, then blue-chip stocks and indexes alone are your best bet in gaining the biggest profits available in the market.

4. Relevant Taxes in Your Area

Fidelity does not take any commission from the purchase and sale of mutual funds. However, it does take some commission for indexes. Additionally, local governments tax stock market returns. In this light, make sure you brief yourself with these tax rates and accordingly incorporate them to your investment plans.

5. Research About Best Trading Practices Top Investors Use

Options trading, active trading, passive trading, and other terms can make it confusing to follow an excellent trading practice. By researching the best trade practices, you can have confidence with every investment action you take. Here are a few ways to do this.

6. Find New Ideas

Warren Buffet isn’t just the best investor around. Look for books and free content online about investing and analyzing the stock market. For example, Investoralist is a great, free-content website that can help you learn more about making the perfect buy and sell of stocks and investment vehicles.

7. Stick with Foundational Knowledge

Before you can walk, you must learn to crawl. Foundational knowledge is the key to finding the best investments. Truthfully, you’ll want to stick with some probability mathematics to determine patterns and trends effectively. From there, you can progress to reading business behaviors and deconstructing market reactions. At that point, learning doesn’t even stop. Always keep learning new things.

8. Use Monitors for Pattern and Trend Identification

Lastly, familiarize yourself with existing technologies to monitor patterns and trends. Additionally, it’s not just the technology, but the best practices and implementations allowing you to react fast. For example, identify the best practice for setting up your tickets, monitors, and charts during your monitoring period.

9. Identify Exceptional Trade Opportunities

  • Manage Risk

If your higher-risk position gives you a chance to go to a lower one to cut your losses, take it. You realize this opportunity through effective risk management, which is critical for active trading.

  • Entry and Exit Strategies

An entry strategy consists of earning enough trading profits to invest in a higher quality or quantity of shares. You can formulate exit strategies using patterns and trends helping you find the highest returns once you let go of your stock.

  • Helpful Decision-Making Tools

Monitors, pattern and trend practices, and even mathematics are the best tools in your bag to make decisions. Learn and use them to your full advantage.

10. Regularly Monitor Your Investment and Positions

  • Risk and Reward Automation

Fidelity and other platforms allow you to set purchase orders once specific investment vehicles reach a certain amount. Automate your orders according to your current risk appetite regularly.

  • Everything Has a Consequence

One investment you make, even if it seems to give you small returns, will still have an effect on your entire portfolio. Make sure to remain mindful about all your investment decisions.

Trading Doesn’t Have to Be Complicated!

The best way to invest is to always keep learning. Armed with the right knowledge, you can execute the right strategy to provide you with the best returns all the time.

Investoralist is a repository of knowledge about trading and the stock market. You can learn more about Fidelity and general stock market trading practices by reading our blog today!

10 Investment Ideas Other Than Stocks

A businessman thinking about investment ideas other than stocks

Once you have secured yourself through insurance and have put aside a substantial amount of savings, then it is high time to look for ways to grow your money.

Investment in stocks through mutual funds and government bonds is always a good idea. However, it is important that people diversify their funds and resources.

The stock market is a very promising source of fortune but the stock market is very volatile and it can be precarious. It would be nice to have a part of your money invested in other places. So after you have learned how to invest in stocks, you should learn other investment ideas that would make your hard-earned and carefully-saved money grow.

Below are a few options other than the stock market.

Rental Properties

Money required: As low as $500, $1,000, or $10,000

A lucrative alternative to the stock market is real estate investment. Compared to the stock market, real estate is less volatile. The prices of real estate in Singapore do not fluctuate that much. In fact, they keep on rising. Investors do not worry about investing long-term as short-term fluctuations are unlikely to happen. Hence, real estate is really a good investment to put your money in.

Investing in real estate is a very good source of passive income. Investors keep on earning returns from rent. Rent has never been this expensive. As a place to live or space to conduct business is a necessity, Singaporean residents and businesses will always continue to find a way to pay up the rent.

There are three various ways to invest in real estate.

The first one is buying the property directly. As real estate will unlikely depreciate but more likely to appreciate value, buying property now is very good alternative where returns are guaranteed.

The second way is through real estate limited partnership (RELP). RELP is composed of investors, usually up to 30 members, who pool their money together for the purpose of purchasing, leasing, and developing real estate. There is a general partner that assumes full responsibility and there are limited partners whose liability is only limited to the amount of money they contributed. This offers relatively high expected returns but with comparably high risks.

Lastly, real estate investment may be in the form of a real estate investment trust (REIT). You invest in real properties managed by your chosen REIT. REITs use investors’ money to purchase, manage, and operate properties. In a sense, investors become part owners of the properties bought, managed, and operated.

Such properties earn in the form of rental income. Part of that earning is paid in dividends to investors.

Farmland

Money required: $10,000

Farmland is probably the biggest opportunity you have probably never heard of. There is an increasing demand for high-quality food but the supply of lands continues to decrease due to development efforts brought by globalization. Hence, farmland is seen to become more essential over time.

Investments in smart agriculture technologies that boost crop produces are expected to generate profits. Investments in farmland have become more profitable than they have ever been before especially that the government of Singapore is taking a more active role in promoting agricultural technology (AgriTech) innovations.

In fact, AgriTech all over the world has skyrocketed by 49% in 2018. Such indicates a growing interest in farmland globally.

You may invest in farmland through AgriFood B2B eMarketplace.

Precious Metals

Precious metals like gold are distinguishable from other asset classes like the stock market, real estate, bond, and equities in terms of the economic forces that determine their prices. Gold is usually bought during the extreme financial crisis or at times when high inflation is expected because it acts as a diversifier that mitigates losses during market stress.

Investments in gold are highly encouraged because this precious metal is highly liquid yet very scarce. It may give you more competitive returns than what other financial assets can give you.

Investments in gold come in many forms. You may opt to buy physical gold (bars and coins). The more common way nowadays is through Internet Investment Gold (IIG) where investors get to buy physical golds online and get them stored in professional vaults.

You may choose to purchase gold-backed exchange-traded funds (ETFs). GLD is a gold ETF.

Cryptocurrency

Cryptocurrency is an internet-based medium of exchange that is distributed across a large number of computers. No central authority runs it. Its decentralized nature keeps cryptocurrency from government control and interference.

Cryptocurrencies are very portable, inflation resistant, transparent, and divisible yet many are still afraid to venture into them.

The most popular and most valuable blockchain-cryptocurrency is Bitcoin. However, there are many other alternate cryptocurrencies that offer various specifications that may be adequate to your liking or preference.

Business Ownership

Globalization has made businesses a good alternative to the stock market when it comes to investments. Invest in a promising business venture like a restaurant, technological school, by putting your money in either private equity or venture capital. However, to be able to do that, you have to be accredited investors.

Cash and Cash Equivalents

This alternative to stocks is an investment on a short-term basis. The maturity period is usually pegged at 90 days. 

It includes bank accounts and marketable securities and should be easily convertible to cash. Thus, equity and stocks are not considered cash and cash equivalents. 

In other words, cash and cash equivalents are the companies’ cash on hand. Those that can be invested as cash and cash equivalents include cash, foreign currency, and cash equivalent. 

This kind of purchase is a low-risk venture partly because there is little risk that its value will change, unlike stocks and equities. If you are interested in short-term ways to invest then this is worth considering.

Peer-to-peer Loans

Peer-to-peer loans or peer-to-peer lending is a new and straightforward market stocks alternative. It is straightforward because its meaning is already indicated in its name. Basically, you will lend money to your peers and charge them with interest rates as agreed upon.

Money required: $1,000

This alternative investment is one of the most viable investment options you have. It is comparable to lending a friend some cash with the expectation of getting paid the whole amount with interest rate. Peer-to-peer lending involves some P2P platforms like Prosper and Lending Club where all you have to do is to invest a particular amount, say $1,000.

All lending transactions can be facilitated through these platforms. Returns are more likely to transpire than losses because there will be more than one borrower of your investment. One defaulting borrower would not automatically put your investment to waste because only a portion of your money was borrowed.

Remember, however, that this investment option is a high-risk, high-return way to invest. Make sure that you do not rely on this solely for your retirement money.

But when you have some extra cash, then peer lending is an opportunity to diversify your investments. Sign up for peer lending in a trusted online platform and be critical on who you lend your money to. You will surely earn from the interest rates when you manage your investment well.

Collectibles – Alternatives to Penny Stocks

Investing in collectibles is a long term investment because a lot of items increase in value through time. Antique artworks, furniture, and jewelry tend to shoot up in value through time. 

Its value also increases if it has a significance in history and culture. This way of investment is very interesting especially if you have a knack for certain hobbies. 

For example, a lot of sports enthusiasts are also into sports card collection. They take the time and effort to acquire certain cards that are rare and limited. 

For collectors and hobbyists, it is satisfying to acquire coveted items. Secondary to this is the potential of turning these collectibles into cash. 

The rookie sports card of LeBron James, for example, fetched a staggering $1.8 million. If you are into this hobby, keep your collection in mint conditions because you would never know the potential value of that investment in the market in the near future.

Fine Wine & Fine Art

Similar to the collectibles, fine wine and fine art are also long-term investments. As you might already know, these two items earn more value the older they get. What is good about fine art, say a painting, is that you may buy it from a random artist at a small price, like $200. And then a decade later, that random artist grew world-famous. 

Suddenly, your $200 investment started to gain thousands of dollars in value in just a decade. This kind of scenario is highly possible when it comes to a fine art. 

So next time you feel guilty for buying that piece of painting for your small art collection in your living room or for buying that bottle of wine you know you won’t open anytime soon, consider the boundless possibilities that can grow out of that purchase.

Angel Investing

If you have family or friends who are starting entrepreneurs or have a great start-up idea, be an angel and give them a head start by becoming an angel investor. By becoming one, you are taking ownership of equity to their start-up. You can either provide a one-time investment to help the start-ups hit the ground running or you can also inject funds a couple of times as the young company takes on the most difficult part of starting a business–the initial stages. 

Angel investing, however, is a risky business. Make sure that you are investing the amount of money that you can afford to lose. Since you are investing in start-ups, then the idea is not something tried and tested. 

However, angel investing also requires thorough scrutiny of promising business plans. If you are to be proven correct in your appraisal and the start-up became big, then you will reap the reward of being a believer.

Closing

You yourself can also be an investment. It is always a good idea to learn new skills. You may enroll in several short courses and acquire certain certifications that would make you eligible to take side-hustles. 

Invest in acquiring marketable skills that can give you a chance to be an entrepreneur yourself. Aside from this, you may also start working with a life coach or a financial coach that would dedicate time to looking through your personal growth. 

Lastly, take a more aggressive approach to learn how to invest. Move over googling “how to invest stocks.” Make your research more systematic and scientific by taking investment courses or talking to registered investment consultants.

Top 10 Ways To Earn A 10% Rate Of Return On Investment

how to make 10 percent interest monthly

Without a doubt, all of us want to earn more. But, the question has always been, how?

In this article, you will read 10 of the easiest tips and techniques to earn a 10 percent rate of Return on Investment (ROI). While you might think that this percentage is too little, note that these savings can sum up a large amount of money when accumulated. Find which of these ways works for you and your situation, especially during recession and pandemic.

Top 10 Ways To Earn A 10% Rate of Return on Investment

1. Real Estate Investing

One way to earn a 10 percent ROI is real estate investing. There are multiple mechanisms to do this. You can choose to rent out your property. Just make sure that the rent rate is more than your monthly mortgage or loan payments. If you don’t want this type of real estate endeavor, you can try other methods too.

You can also buy and sell homes to earn an income. A pro tip here is to invest in single-family rental homes. These types of homes sell like pancakes.Experts even claim that these types of houses will continue to grow even during and after the pandemic. With the work-at-home option growing popular, people choose to stay in these comfortable and affordable homes even with a high rent rate or an expensive price tag.

If you want to venture into the market of single-family rental homes, you might want to check out companies like Roofstock. The company is dedicated to this type of rental service. They offer to buy, own, and sell rental homes, so this is the best place for you to find potential clients and customers. They are one of the best in the industry, but you can surely look for other companies in the same field.

If investing in single-family rental homes is not right for you, you can also try to invest in real estate debt. Here, you can invest in the loans made to borrowers. As these borrowers pay back their loans, you get to earn you money as well. The nice thing here is that you do not need to manage the property while being part of the thriving real estate investing industry. You can check out Peerstreet if you want to try this out.

Another option to enter real estate investing is to invest in corporations that give dividends or dividend stocks. It may take time before you profit from these real estate investments, but they are relatively more stable sources of income. They are for a long term investment. You might have to wait for five years for your first dividend, but you can earn per month or per quarter after that. Check out Fundrise or Streitwise if this type of real estate investing works for you best.

2. Paying Off Your Debt

If you have an existing loan, chances are you are losing a lot of money because of the interest rates you are paying back. One easy way to earn a 10 percent Return on Investment is to pay back your loans so you can save money. The longer you are keeping your debt, the higher the interest rate you are paying. By doing so, you are no longer charged with the interest rate each month, thereby making you save a ton of money per month.

Just think of this scenario – your credit card debt charges you around 16 percent per month. The longer time you wait to settle your debt, the more money you have to pay the loan agencies per month. The same goes for your other loans. For example, student loans have big interest rates, so you have to pay them back as soon as you can.

If you cannot avoid taking loans, you have to apply to the best credit institutions or to take the best credit cards available in the market. Only take loans with fair and reasonable terms. If you fail to do so, this could hurt your finances in the future.

3. Long-Term Stock Trading

To invest in stocks for the long term, you have to get in touch with an investing company and let them manage your money. Long term stocks are conservative because the Robo advisors or financial advisors put your money into various businesses. They are the ones to choose an option for you. In doing so, you, as an investor, are not taking too much of a risk.

One downside of this type of stock trading is that it might take months or years before you start earning money. But once your investment has given your due diligence, you can start earning high returns.

If this option fits you and your financial goals, you can contact a trusted bank, a discount broker, or even a smartphone app. A financial advisor or Robo advisors will then choose where to put your money.

4. Short-Term Stock Trading

In long-term stock trading, you make trades for a long period of time, like for several months or often years. In contrast, in short term stock trading, you buy-and-hold trade quickly in days of weeks. This is a riskier type of investing because you are only given a short period of time to make trades. The short term fluctuations in the market can potentially turn you into a financial success overnight or potentially lose your savings.

Honestly, the short term stock trading is not meant for everyone. There is a learning curve if you wish to do this for a living. Remember to read various resources before jumping into this market to come in ready and prepared.

5. Starting Your Own Business

If you have a trust issue and would not allow other people or organizations to manage your money, you can always start your own business. Once you build a successful business endeavor, you can ensure your continuous 10 percent earning per month.

To get started in your own business, you have to begin looking at the market familiar. If you are a fan of a fashion, technology, or food trend, make your business revolve around things you know and love.

One of the best tips when starting your first business is to use your personal capital. This is to minimize the risk of being in debt. You do not need to start big here. You can start small, grow your business, and then acquire investors once you are confident about your business plan.

If you plan on investing in a small enterprise, you should get familiar with Facebook, Twitter, Instagram, or other social media marketing tools. These are affordable and easy-to-use tools proven to attract the money market. With limited funds, you might have to do much of the work in the first few months of your business.

6. Art and Other Collectibles

Do you know that your collection hobby can be turned into a profitable business as well? Art and other collectibles can diversify your investments. Make money by buying popular collectible items, keeping them in good condition, and then selling them to the right customers. Navigate Facebook, Twitter, and Instagram to know what items are hot among collectors.

Some of the common collectibles in the market today are books, toys, legos, paintings, and many more. Popular media items, ones released by corporations like Disney, Warner Brothers, Mattel, etc. are also safe bets when it comes to earning your 10 percent ROI. And of course, try to stick on the market that you are already familiar with. If you are into Harry Potter, for example, start your collectible items within this realm.

7. Create a Product

If the stock market or real estate investing does not appeal to you, you can always try to make products that could entice people. One of the useful tips in creating a product is to get an education about the industry before designing or developing a product.

You do not just produce something and sell it to others. Instead, you have to gather the necessary information from your potential clients to ensure that you create a marketable and profitable item.

When creating a product, do not limit yourself to the fashion or food industries. For one, digital products are popular among younger consumers today. You can create a blog, vlog, website, or other online products and earn 10 percent of ROI monthly.

8. Junk Bonds

Given the economic crisis we are currently facing, investing in junk bonds can be the best investment option you can do today. Junk bonds refer to bonds rated below investment grade by the top rating agencies in the country. Most investors would not choose to invest in junk bonds because they carry a higher risk of default than other bonds. But, take note that junk bonds have the potential of significant price increases when the company’s financial situation improves.

Remember that investing in junk bonds is like betting to a given business. This means that before investing, you have to gather all the relevant information to bet on the business that is likely to be a success in the next months or years. If you have to invest in the right junk bonds, the return can be big for you.

9. Peer-To-Peer Lending

Peer-to-peer lending, otherwise known as P2P lending, is a mechanism where lenders are matched to borrowers. You have to use a third party business like Lending Club or Prosper.

In Lending Club, for example, you can earn a rate of return on investment of over 10% per year. For more conservative investments, the ROI is at 6 percent, while for more risky investments, you can even earn a return on investment of 20 percent or more per year.

10. Master Limited Partnerships

There are basically two paths to take under the master limited partnerships. First is the so-called limited partnership is where you provide capital for the business and eventually receive income distributions. Here, you become an investor because of the money you gave to the business as their capital.

On the other hand, there is the so-called general partnership. Here, you help manage the business. Eventually, you get a return on your investment in the form of a compensation basis monthly.

Note that Master Limited Partnerships is similar to trading stocks. They can be risky and are not for every investor. If you wish to proceed, you might want to consult a financial advisor before committing as an investor.

Which One is Right for You?

If you have some funds in your savings accounts, your money is sleeping because of the extremely low-interest rate it earns from the bank. In some cases, inflation could even decrease the value of your funds. If you truly want to improve your personal finance and grow your funds, you have to start building your investment account. As an investor, begin with the industry familiar to you.

Before investing, you have to be certain how much money from your savings account you are willing to use in investing. Also, create a target on when you want to start earning your ROI. All these factors are essential in choosing which type of investment you are willing to make.

While not necessary, it will not hurt you to know the basics concepts in finances and investing, including inflation rate, interest payments, money market fund, credit score, government bonds, and many more.

You do not need to invest a large sum of money. You have to be certain that you are investing in a field with a high rate of return or a growth rate. Make the right decisions by getting insights, suggestions, or education from groups and individuals who are experts in investing. There are more tools online than ever that could make you start earning that 10 percent ROI of interest monthly.

Conclusion

As seen above, there are more ways than ever to start earning that ROI of interest monthly. If you are afraid to start investing, financial websites, consulting firms, and business organizations can be found on the Internet. These groups and individuals are willing to help you and guide you in investing your finds to rightful businesses or endeavors.

One of the most reliable financial websites today is Investoralist. We have tons of reading materials, tips, and guides for you. We can help you understand seemingly complex concepts like compound interest, day trading, real estate investing, mutual funds, money market funds, and more. Just send us your queries and concerns, and we will provide you the necessary information you need.

The 10 Best Vanguard Funds for 2021

best vanguard funds to buy now

For people looking to diversify their assets, investing in Vanguard Funds is a good option. The Vanguard Group, an American registered investment advisor, has provided mutual funds and index funds to millions of investors in the past. It is known to promote low-cost, beginner-friendly investment for individuals with little to no knowledge about the trade.

If you wish to know more about earning additional income through investing in bonds and index funds, this article is right for you. We will help you identify the best Vanguard Funds buy and hold this year. Also, we clarify how each type of index fund.


What Are Vanguard Funds?

Vanguard funds are a type of index funds managed passively through a so-called index-sampling strategy where it tracks a benchmark index. This index is a list of companies grouped based on specific categories like geography (domestic, regional, international) or size (small-cap, mid-cap, large-cap). Vanguard earns money by charging expense ratios which is a fee paid by clients in exchange for the company’s job of managing the index funds for them.

Many investors choose vanguard because they are known to offer one of the lowest expense ratios in the market today. Also, even with a little money you have, you can create an investment. Businessmen like Warren Buffett, who is the CEO of Berkshire Hathaway as well as dozens of other companies, advocates the use of Vanguard funds because it brings investment to the masses. Investment advisors like this company make it easier for lay citizens to dabble in the world of investment.


How Do Vanguard Funds Work?

Vanguard is the world’s largest issuer of mutual funds and is the second-largest issuer of exchange-traded funds (ETFs). Investors who buy from Vanguard are not charged with fees or commissions. Instead, they have to pay for the so-called expense ratios. The expense ratios for mutual funds and ETFs are calculated by computing the operating costs of the fund and divide them by the assets under management (AUM).

For many investors, Vanguard’s low expense ratio is the reason why the company is the best investment advisor there is. To give you an idea, the company’s expense ratios for its mutual funds are around 80% less than what other companies offer. For those who wish to keep their investments for the long term, they could save thousands of dollars in a 5-year or 10-year average.

Aside from saving fees, the ETF and mutual funds sold by Vanguard are often cited as profitable. Anecdotes from individuals who have invested through Vanguard swear by the efficiency and effectiveness of Vanguard as an advisor. People looking to diversify their savings or retirement funds choose to invest in this company.

Top 10 Best Vanguard Funds for 2021

When is the perfect time to save? The answer to this question is always now. Admittedly, there is so much to unravel and understand when it comes to investing. Terms like stocks, mutual funds, government bonds, and many others are a challenge for individuals who do not have prior experience in investing.

Lack of knowledge on stocks, ETFs, and mutual funds should not deter you from starting to build your investment portfolio. In fact, financial advisors recommend individuals to start investing in small-cap to mid-cap funds this year. Do not be content with paying off debts on your credit cards or buying real estate properties. Vanguard funds below are a good starting point in starting your investment journey.

To use Vanguard funds is to choose one or two of the many index funds they offer. As an investor, you can choose which fund you think will give you the biggest return in the long term. In spite of this, it is important to remember that choosing one specific type of ETF is like betting on a particular industry or stock market niche. Hence, it is important to choose an ETF that you think will have a good performance in the long term.


1. Vanguard Dividend Growth Investor (VDIGX)

  • Type: Dividend growth
  • Market value: $40.8 billion
  • Dividend yield: 1.7%
  • Expense ratio: 0.22%

Investors earn some income by being exposed to dividend-focused companies from various industries based in the United States. The fund tracks the performance of high-quality companies that are known to have the ability to grow their dividends in a certain period of time. The risk of VDIGX is that it is fully exposed and dependent on the domestic stock market. A downfall in the domestic stock market could mean a loss to the investors of this fund.

Investment advisors often claim that investing in the Vanguard dividend growth fund is the best choice one can make this year. It is the best actively managed dividend growth funds in the market today. It is more stable than other funds in this list, which means less risk to you as an investor. The minimum investment for this fund is $3,000.


2. Vanguard Dividend Appreciation ETF (VIG)

  • Type: Dividend growth
  • Market value: $51.1 billion
  • Dividend yield: 1.7%
  • Expense ratio: 0.06%

This fund tracks the performance of the NASDAQ US Dividend Achievers Select Index, which is previously known as the Dividend Achievers Select Index. Somehow, it is similar to the approach of VDIGX. The only difference is that this ETF mainly relies on the rules-based system. Human managers play a very little role when it comes to managing it. Choosing between VIDGX and VIG is a matter of choosing between human controllers and a rules-based control system.


3. Vanguard Short-Term Investment-Grade Investor (VFSTX)

  • Type: Short-term bond
  • Market value: $61.5 billion
  • SEC yield: 2.2%
  • Expense ratio: 0 .20%

While the first two funds have more risk, more reward approach, this index fund is particularly notorious for having less risk and less reward. It is a short-term fund that invests in high- to medium-quality, investment-grade bonds with short-term maturities. It invests primarily in corporate bonds, U.S. government bonds, and pooled consumer loans.

This investment is for individuals who have short-term savings goals and who are willing to see only a minimal price movement. The minimum investment for this fund is $3,000. Meanwhile, the fund advisor is Vanguard Fixed Income Group.


4. Vanguard Limited-Term Tax-Exempt Investor (VMLTX)

  • Type: Limited-term municipal bond
  • Market value: $29.5 billion
  • SEC yield: 1.3%
  • Expense ratio: 0 .17%

This one is considered as a low-cost municipal bond fund that wishes to have an income exemption from federal taxes. It has an index of more than 6,000 municipal bonds. Investors of this fund face minimal risk, especially that municipal bonds are less likely to default than corporate bonds. Oftentimes, it is chosen by groups and individuals who belong to higher tax brackets.

The minimum investment for this fund is $3,000. Also, the fund advisor is Vanguard Fixed Income Group. If you wish to save on the expense ratio, you can choose Admiral Shares (VMLUX) instead.


5. Vanguard Health Care Investor (VGHCX)

  • Type: Health sector
  • Market value: $47.5 billion
  • Dividend yield: 1.1%
  • Expense ratio: 0 .34%

This is an actively managed fund that has been in existence for more than two decades now. It is a low-cost index fund that tracks the performance of domestic and international companies belonging to the healthcare industry, which includes medical research facilities, medical supply companies, and pharmaceutical firms. One advantage of this fund is that it has geographical diversity as it invests in companies based in various parts of the globe.

Meanwhile, one downside of this investment is that investing here means investing solely in the health care sector. A good way to balance this out is to invest in other sectors. This fund is best for those who have a diversified portfolio with a long-term horizon. It remains one of the best actively managed funds offered by Vanguard. By the way, the minimum investment here is $3,000.


6. Vanguard Wellington Investor (VWELX)

  • Type: Balanced
  • Market value: $110.7 billion
  • SEC yield: 2.3%
  • Expense ratio: 0 .25%

This one is considered the oldest mutual fund offered by Vanguard. It is an investment to both stocks and bonds in various economic actors. It is particularly known for having a broad diversification and a well-balanced asset class. It has a medium risk and medium reward scheme.

Take note that you can only buy this fund directly from Vanguard. The minimum investment fees or amount here is $3,000. Also, for this mutual fund, Wellington Management Company LLP will serve as your fund advisor.


7. Vanguard Total Stock Market Admiral (VTSAX)

  • Type: Large blend
  • Market value: $874.5 billion
  • Dividend yield: 1.7%
  • Expense ratio: 0 .04%

It is considered the biggest index fund offered by Vanguard. Hence, for some, it is the best vanguard you can buy any day. This fund exposes investors to the entire United States equity market, which includes small-cap, mid-cap, and large-cap stock funds. It is mainly for investors looking for a low-cost investment who are willing to bet on the U.S. stocks market.

This is popular because it is low cost, has a broad diversification, and can be efficient when it comes to tax. It has a relatively high risk and high reward capacity. Also, it has a very low expense ratio. Note that you have the option to buy this as an ETF.


8. Vanguard International Growth (VWIGX)

  • Type: Foreign
  • Market value: $38.8 billion
  • Dividend yield: 1.2%
  • Expense ratio: 0 .45%

While VTSAX focuses on the domestic market, this International Growth Fund focuses on non-American companies with high growth potential. Investors are apprehensive to invest in this fund because it is less stable than the domestic fund. On the other hand, it is a good choice for those wanting to be less dependent on the U.S. economy.

This is an aggressive type of investment. But don’t worry because the 10-year average of the fund has been nothing but positive. This is mainly because of the fact that companies overseas have been growing in the past decade. Its 10-year average return is at 10.38% while its 5-year average is at 16.25%.


9. Vanguard S&P Small-Cap 600 ETF (VIOO)

  • Type: Small-cap stock index
  • Market value: $1.1 billion
  • Dividend yield: 1.4%
  • Expense ratio: 0 .15%

This ETF tracks the performance of stocks belonging in the S P Small-Cap 600 index, which is a list of 600 small companies based in the United States. Notably, the share value of this fund fluctuates abruptly compared to bond funds. Investing here is best for those who have long-term goals and are willing to face high risk and high reward.

It is an aggressive type of investment. People investing here are often individuals who believe in the capability of the US stock market index fund. Investment advisors suggest that investors should purchase this ETF because it will continue to continue growing in the long term. To give you an idea, the top 3 of its largest holdings as of October 2020 are NeoGenomics Inc., Kinsale Capital Group Inc., and Stamps.com Inc.


10. Primecap Odyssey Stock (POSKX)

  • Type: Large blend
  • Market value: $10.8 billion
  • Dividend yield: 1.0%
  • An expense ratio of 0. 66%

For those looking for a Primecap product from Vanguard, POSKX is a good chance for new investors to get one. This fund is managed by various fund managers. Most of the stocks of this fund are invested in the technology and health care industries. Hence, investing in this fund is risky, but on many occasions, the gains are big too.

Investing in this is not as affordable as investing in other actively managed funds of Vanguard. Despite this, some advisors claim that the 10-year average return of this fund is expected to be high.


Bottom Line

Vanguard index funds have been offering affordable and reliable options of investment for the general American population in the past decades. People who wish to diversify their investment portfolio choose to get one or more of the ETFs offered by the company.

It is noteworthy too that aside from investors belonging to a high tax bracket, there are also vanguard index funds sold made for just looking for minimum investment options or those who have bit built an investment portfolio.

Also, take note that the 10 index funds discussed above are only the top best choices of index fund investment in 2021. Needless to say, Vanguard has a long list of other products with the potential to become a high growth index fund.

It includes Vanguard 500 Index Fund Admiral Shares (VFIAX), Vanguard Total International Stock Index Fund Investor Shares (VGTSX), Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), and Vanguard Total Stock Market Index Fund Investor Shares (VTSMX). These Vanguard index funds can also be a good investment in the next months or years to come.

Understandably, the topic of investing is difficult to understand. If you wish to learn more about Vanguard index funds, the fees associated with it, and the expense ratio tied to these funds, browse more of our articles on Investoralist.

Admittedly, one article will not provide you with all the information you need to fully understand the concepts of investing. Our website is dedicated to helping you not only on the topic of investment but also on other financial topics of retirement funds, mutual funds, real estate, credit cards, credit score, target retirement funds, and many more.

10 Best Ways How to Invest $20,000 Wisely

how to invest 20000 dollar

It’s not really common for one to inherit or save $20k, as that is a relatively huge amount of money. Credit cards sometimes hinder us from saving! But if you have that amount of cash in your hands, then good for you!

Now, what you would want to do with that amount of money is not to let it sit around. Because of inflation, you might end up losing money rather than making more of it! This is why the idea of investment comes into the financial picture.

This article’s content will help you with 10 of the best ways to keep your money rolling.


1. Invest With a Robo-advisor

One of the best ways to invest 20k is to do it with a Robo advisor. Doing so will keep you invested in the stock market using broad and various approaches. There are many resources and content online should you know more about what Robo advisors do and how they could help you with stocks, ETFs, personal loans, and credit card budgeting. However, let me give you an idea about what Robo advisors are. For one, they know money cards best.

A Robo advisor, in general, is like a financial advisor. Still, instead of them being a person, your finances are analyzed by a series of computer algorithms that are programmed to adjust, maintain, diversify, and pick out your investment as time passes by.

Just like what a financial advisor would do, all these algorithms are based on the context of your finances, credit card debt, car insurance, emergency fund, your risk level of choice (also known as your risk tolerance), and the duration of your investment plan. Also, you can opt for some regular, taxable investment account. You can set up your own IRA funds ETFs by yourself.


2. Max Out Your Retirement Accounts

If people around you say that it is too early (or sometimes late) for you to plan for retirement, then don’t believe them. With an investment of 20k, you may have the financial buffer you need to increase or max out your 401 k and even your individual retirement account.

Take note of these three strategies:

  • Always remember that you put into an investment for each dollar and know that your employer at work will match a portion of that amount. While we all know that plan terms may differ. But a 50% to 100% match on your contributions as an employee (those which range from 3% to 6%) is something that isn’t rare.

    That’s why the tip is for you to be able to contribute an ample amount to earn that full match. You won’t need to worry because if you end up short on your utility bills or credit card bills, for instance, your $20 000 is there to cover for you. Just be sure to read their privacy policy as well.

  • Another strategy is to open an account with the IRA and make sure to maximize that out. Choose between a Roth IRA to collect tax breaks in retirement should you opt to start financial withdrawals. You can also choose a traditional IRA (different from a Roth IRA) for tax deductions made upfront.

  • Lastly, even if you think that it makes sense to raise your best personal 401 k contributions, know that you may also have other goals for investment. This year, to max out both your 401 k and your IRA or Roth IRA, you would need to use a benchmark of $25k if you are aged 50 or below. Also, take note that the annual contribution limit is $19.5k for 401 k and $6 000 k for your IRAs. This is one of the best credit deals ever.

3. Invest With a Broker

Now, if you are those types who wouldn’t patronize Robo advisors’ use because you would want the best credit or to invest on your own instead, that is also a fine choice.

Personal finance brokers, especially with a good investment portfolio, can help you do that–even with mutual funds or retirement funds—people before used to pay high fees to brokers who would trade on their behalf.

Thanks to algorithms, technology, and artificial intelligence, these are now becoming things of the past. All you have to do is to create a brokerage account.

Online brokers now exist, and they only cost a fraction credit of the cost of your regular, traditional brokers. They know credit cards best. They know insurance best. They handle your accounts best.

These online platforms, using a brokerage account, can help you get educated not only with the stock market, the stock exchange, and how its dynamics are but also on investments — namely– how to build your investment options and your other credit investment products.

They can also help plan you with the best online car insurance, emergency fund, life insurance, checking accounts, or even mutual funds.

Some online brokers offer stock trades for free, with additional educational resources that explain how investing works. Others may charge fees, but you get additional options, such as a real-time monitoring system on how the stock market performs.


4. Do a 401(k) Swap

You may already get this idea: if you are not jobless and have 20 000 dollars at hand, which you can use two invest, even for your retirement, it is also the best way to do a credit 401 k swap effectively.

You can easily invest 20k with this method. This is a good advantage to tax-loss harvesting and investing more in life insurance as you age.

Since this type of money comes from your payroll or your work bonus, you can increase your contribution amount, usually up to 75 percent of your paycheck, until you have contributed $20 000 using that money you have on hand — just so that you can replace the income that you have lost.


How Does This Work, Though?

For example, a way to invest here is to imagine that you are a person who makes $40 000 per annum and that you are currently contributing 5% into your 401 k (life insurance) right now.

This amount will be about $2 000 per year, assuming that no employer match is included. Given this context, let’s continue to think that you have come into $20 000 that you’d like to invest.

What’s going to happen is that you could keep that $ 20 000 in some high yield savings accounts and then increase your 401 k contribution, which will make you feel that you are not living off of any less. That’s one way to take advantage of a high yield savings account as well.

Now consider this: instead of paying a five percent contribution, raise them to 50%! After a year, you did not just invest 20 000 bucks, but you have just reduced your taxable income by 50%. From the government’s perspective, you just paid fewer taxes because you earned only half of what you received per annum.


5. Put the Money in a High Yielding Savings Account

In relation to point number 4 above, we would still recommend that you, as an investor, put off 50% of your money in a high yield savings account because going above it might not return greater investment returns.

However, if you are certain that you will need the money shortly, you should feel okay about going above fifty percent; but we advise you to think twice.

There are high-yielding savings accounts that will give you a 1 percent yield per annum (or sometimes higher). This is good for a savings account. But if you want a higher reward for your investment, one way to invest is to invest in stocks, although you will need to have a higher risk tolerance for this.

Another way to start investing is to do this with your money through the best Robo advisor in the utmost conservative way possible. For instance, if you save for a house, you choose to take your money out of your high-yield savings account and put it onto that best Robo advisor.


6. Try Out Peer-to-peer Lending

Peer lending is a method of loaning money to others who need it. It is a great way to invest. You can lend to someone who needs investors for their business idea, their student loans, for instance, or some would want to pay the debt on their credit cards or bank account. In other words, it just seems like you’re providing personal loans to other people. Some people would do this best online.

Now, the benefits you can get from peer lending is that your investments can give higher returns as compared to having to invest in stocks. When you invest your money here, however, the risks are so much higher.

Because according to experience, people would not usually pay back the personal loans on time, or in some cases, you might not make money because, as you start lending to them, they might not pay the personal loan back at all.

Before you engage in peer lending, be sure to heed to investment advice first (such as Robo advisors), and make sure that you have the personal capital to lend. Remember: based on data, the more risk you are taking, the more yields you receive.


7. Start Your Own Business – 100% Recommended!

Pre-discussion notes: The recommended percentage allocation of investing 20 000 bucks for this is 100%; however, take note that this involves a high level of risk.

Starting a business can be stressful sometimes, but always know that this is a very lucrative line of work and that most times, it is also very fun. All you have to do is to be certain about your plans and what you are doing.

Where does this start, you might ask? It starts with a solid and clear business plan. Without this, starting such a business might just put your investment goals and funds into waste, and might only live for a short term.

Sometimes, you can look for business partners or financial advisors to help you analyze the risk. Compared to other methods on how to invest, you will need to have personal capital and time, and a lot of energy to keep your best personal business going. Some businessmen would say that sometimes they would even work for more hours than a regular employee.

Just get started! The fund’s payoff can be great, and these investments may be good in part for the long term as long as there’s a money market for your products. If you are equipped with the right information and do things the right way, you could end up profiting from your products–with or without business partners on your side!


8. Pay for an Education

You might remember your parents telling you when you were younger that the only thing that other people can never take away from you is nothing but education. Well, a lot of people have testified to the validity of that quote, and the principles behind it stay true –even up to this day. If Robo advisors could talk, they might even suggest the same thing!

Even if you invest in stocks, you can lose all your money in the stock market. You can go bankrupt on your bank account. You could even stumble into debt on your credit cards or even on your checking accounts. But if you have a strong foundation in education, that foundation will never go away.

If you do not have a bachelor’s degree, be an investor in your education, and consider getting yourself through college. Access to this may be hard as you might fall into student loans. If you do already have a college degree, consider getting a higher form of education. For some schools, student loan services are usually available even for graduate degrees.

If you have the college fund to access higher education, consider this one of the best ways to invest in your future. Know that when you invest 20k into this, it might not cover all your fees, but this will surely be a good investment portfolio.


9. Be an Investor in Your Education Today!

Invest in an employer-sponsored retirement account. Once again, one great way to invest your 20 000 bucks is in your retirement account. You can get ample tax advantages when you invest 20k into accounts such as 401(k), the traditional IRA, or Roth IRA.

The first investment for many people is the 401(k) plan, co-sponsored by your employer. This can help you get started with your investments since the transactions are automatic.

One thing to consider about investing in 401(k) plans is the high management fees. With this, your investments might grow more slowly than the other types. This gets worse if the set of options you would otherwise choose and invest 20k on is not offered.


10. Invest in Real Estate Investment Trusts

REITs (also known as real estate investment trusts) serve as an alternative real estate directly when it comes to real estate investing. Some would offer the most attractive services, products, and other information regarding money market accounts and stock trading.

REITs have been very popular in forms of real estate investments since the 1960s. Think of REIT as somewhat to a huge lending club of real estate assets whose location is freely traded on the stock market.

Similar to real estate, REITs can invest in more options and locations. Also, as additional information, know that real estate is categorized into the following:

  • Retail
  • Residential
  • Lodging and Resorts
  • Specialty
  • Industrial and Office
  • Health Care; and lastly,
  • Self Storage

To invest money in REITs can be done easily by any investor (and sometimes guided by best online financial advisors), regardless of their credit score, because of the availability of mutual funds and ETFs. If you are a beginner, you can think of getting index funds based on REIT as a start. You can also check out a crowdfunding website or sites online that offer such services–including ETFs.

Personal finance success stories in real estate prove that it is an excellent avenue for long-term stocks investment. Know that purchasing property accounts best more of a sizable monetary investment (sometimes higher than 20 000 bucks).

However, always remember that you can start investing in REIT, as this is a strategic alternative in owning real estate. This is because REITs provide good gains from expense ratio as you get passive income, a growing nest egg, and a diverse investment portfolio. Imagine how you will continue to earn from stocks or ETFs–even up to your retirement accounts!


Conclusion

Invest your $20k into good use by planting them into the right avenues. Some advisors are available best online, as compared to the traditional financial advisors. You can trust them to Robo advisors who know insurance best or credit cards best. They can handle your accounts best as well! Aside from these, they can educate you with stocks!

Aside from those, other ways to invest can be chosen as well. From education to stocks, to real estate, to ally invest, always remember that you will benefit in the long run as long as you invest your money carefully and properly.