Friday, May 18, 2018

What To Do When Your Investments Lose Money

In February, almost a year's pay vanished from my accounts.  It went up in smoke, disappeared, and gave me nothing in return.  What should I do about it?  What should I not do?

Move My Investments to Something Safer!

When the market goes down, many people, particularly inexperienced investors or those who do not really understand the stock market, just want out.  They are afraid that even more of their wealth will disappear and they decide to head for the safety of a bank account, but often all this does is locks in a loss.

If your investment is losing money or not making as much money as you would like, you need to consider several questions:
  • Why is my investment losing money?  What would need to change in order for it to make money?
  • What is the purpose of this investment?
  • What are the other options?

Let's look at those questions with respect to some investments I've discussed on this blog.

Peer-to-Peer Lending

When I started investing via Lending Club and Prosper, average returns near 8%, at least when the economy was good, appeared do-able, though I was aware that if there was an economic downturn, defaults would likely rise. I thought it was worth the risk, and at first it seemed like those would be good investments.  Then I noticed the returns dropping, and reading various blogs and other information available online I realized I was not alone--many investors were having all their interest for a month eaten up by defaults.  So, on to the analysis:

  • Why is my investment losing money?  My investment is losing money because Lending Club and Prosper's rates are too low for the risk the borrowers pose.  When it became apparent that more people wanted to invest in their notes than wanted to borrow money, Lending Club and Prosper lowered their interest rates/loosened their standards to attract more borrowers.  Since Lending Club and Prosper make their money servicing the loans rather than investing in them, it is to their advantage to write more loans.  As an investor, I have no control over the underwriting of the loan and no expertise that would allow me to design a meaningful filter to check Lending Club or Prosper's underwriting. 

  • What is the purpose of this investment? I invested in these notes because I wanted income and wanted some liquidity.  They are still providing limited liquidity--each day I have the choice to re-invest money paid to me, or to withdraw it.  As an example, this week I will be withdrawing $155 from Lending Club and $131 from Prosper, and those are sums that have accrued this week.  However, last year my interest only exceeded the amount lost to defaults by a small amount, so this investment is not providing the income expected.

  • What are the other options?  The traditional income investment is bonds and/or bond funds.  They provide income and liquidity.  Yes they can go up and down in price (and lately bond funds have been decreasing in value) but they have a longer history than peer-to-peer lending and there are professionals on both sides of the bond transactions, whereas with peer-to-peer lending the party with the knowledge to properly price those notes has more interest in the loans being made than in them being paid. 

  • Conclusion:  I'm withdrawing money from Prosper and Lending Club.  I'm not saying I'll never invest with them again, but the odds are against it. I think buying a diversified bond fund is safer and the income more predictable.  While my overall return now is better than what most bond funds pay, the economy is good.  If a downturn occurs, I expect defaults to rise and right now, my account can't take more bad news and remain profitable.

The Stock Market

All of my investment accounts are worth less than they were two months ago.  I made lots of money in the stock market last year; am I going to lose it all this year?  Who knows?

  • Why is my investment losing money?  The talk of tarrifs is what the professionals blame last week's problems on.  Whatever the problem is, I have a lot of company.  Most stocks and mutual funds were down about the same percent as I was.

  • What is the purpose of this investment?  The purpose of investing in the stock market is long term growth.  Statistically speaking no other investment has outpaced inflation over the long term.  However, historically speaking the stock market has had its ups and downs.  The market may be down this month for whatever reason, but there is no reason to think that it won't eventually go up again.  Since this is money meant for long-term growth, I can afford to wait.

  • What are the alternatives?  Bonds, bank accounts, real estate.  Long-term all pay less than stocks. 
  • Conclusion:  Selling stocks because of a market decline just locks in losses.  Market declines are going to happen, but long term, the market, as a whole, is a winner.  Market declines are good times to buy stock if you have extra cash sitting around.

My Shares in XYZ

If you own shares in XYZ (fictitious company) and they fall, then it is time to look at XYZ.

  • Why is my investment losing money? me, but the market has a whole as dropped about the same as XYZ.  Well, it is likely that when the rest of the market recovers, so will XYZ.  If you want more XYZ this could be a good time to buy.

    XYZ just got sued in a big case.  XYZ just changed CEOs--the last one went to jail. No one is buying XYZs products and they've laid off half their workforce.  The price of XYZ has decreased because the value of the company has decreased.  If you believe the company's prospects are good despite this news, hang on for a bumpy ride.  If you have no reason to believe the market is wrong, then get out while you still have some value.
  • What are the alternatives?  There is a whole stock market full of alternatives
  • Conclusion:  If an individual stock falls, find out why.  Use the answer to that question to help you decide whether your money would best be deployed elsewhere.
The trick, of course, is to realize whether your losses are the result of an ordinary market downturn or whether your losses were caused by a problem with the investments.  Most advisors suggest NOT watching your investments too closely because it makes you want to take actions that, all things considered, are not in your best interest.  Nevertheless you should be aware of how your investments are peforming compared to the market as a whole as well as similar invesments, and if yours are consistently underperforming, you should be willing to change. 
*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, May 4, 2018

Why I Will No Longer Invest Via Lending Club

I've written several posts about my foray into Peer-to-Peer Lending via Lending Club and Prosper, and in the past few weeks I've read several (probably sponsored) articles encouraging people to invest via these platforms.   After reading a bunch of blog posts several years ago, investing some money on these platforms seemed like a good idea.  Now, after about three years, I am in the process of withdrawing my money and I do not advise anyone to put their money into these platforms.  Why?

The Reward Does Not Compensate for the Risk

Bank accounts don't pay much, but you know you aren't going to lose money.  You can lose everything investing in the stock market, but you can also double or triple your money, or more.  The upside of bonds is limited, but the risk of your investment being worthless can be limited by investing in high-quality bonds.  After investing via Lending Club and Prosper for three years, I have no trouble saying that the rewards do not compensate the average investor for the risk being taken.

Default Risk

Both Lending Club and Prosper warn investors to expect defaults--that's the nature of unsecured loans.  Some people will pay them; some people will not.  The unfortunate fact is that lenders have to make enough money off those who do pay to compensate for those who do not.  

At different times, the overall default rate increases or decreases due to the overall economic health of the country.  When times are bad, more people lose their jobs and when people lose their jobs, unsecured loans are the first payments skipped.  The rates charged for loans have to consider not only what the rate is likely to be today, but what will likely happen if the economy tanks.  I'm not earning enough today to convince me that I wouldn't lose money if the economy tanks.  Too many people are defaulting now--in April my average balance with Lending Club was about $9,200 and, after defaults, I earned $6.89.  Since unemployment is low and the economy is basically doing well, I have to believe I'd lose money if we move toward a recession.  

Lending Club publishes statistics about its overall portfolio and about what returns can be expected.  You can see them here. When I started investing via Lending Club, the norm from which it was hard to stray if you had a reasonable sized portfolio was about 8%; now it is about 5%.

Underwriting Risk

Before investing via Lending Club and Prosper, I did my homework.  I read articles.  I read the statistics on their websites.  Everything was showing average returns in the 8% range.  With returns in good times in that range, I figured there was room for some defaults in bad times.  Then something changed.  Interest rates went down and underwriting standards were made less stringent, which resulted, of course, in more defaults.  

The big difference between Lending Club and your local bank or payday lender is that the bank and payday lender are loaning out their own money. If you don't pay back your loan, they lose money.  If a Lending Club borrower defaults, Lending Club doesn't suffer the loss, the investors do.  Lending Club makes their money via origination fees and via service fees (they take a small percentage of each loan payment).  It is in Lending Club and Prosper's best interest to facilitate as many loans as possible.

There are two ways the conflict between investors and the platforms comes into play.  First, as noted above, is when the platform lowers interest rates or credit qualifications in order to increase loan volume.  The second is when the platform solicits current borrowers to refinance loans at a lower rate.  The platform gains an origination fee.  The borrower (hopefully) saves money.  The investor loses because the high-interest loan is paid off early and therefore with less interest.  Also the 1% service fee on the lump sum repayment can consume several months interest.  

Lack of Knowledge

I am not an expert on underwriting loans.  As a matter of fact, I know very little about it.  When loans are offered on Lending Club and Prosper, certain data points are made available to investors, but I lack the ability to analyze that data to determine in the offered interest rates are sufficient.  Banks and their computers do not have that problem, and more and more of the loan volume on Lending Club and Prosper are being purchased via computer by institutional investors.  I have a hard time believing those computers will not skim the cream of the loans, and I can't even identify the cream.

You used to be able to find blog articles about "filtering" Lending Club or Prosper loans--searching the offered loans for those meeting certain criteria that historically (short as "history" was) had done better than average--and then purchasing those loans.  NSR Invest offers a tool that allows you to back-test your strategy--to see if filtering out certain loans or looking for others would have increased your return on investment IN THE PAST.  The problem is that Lending Club and Prosper can (and do do change the rules at any time.  Unless you have a very good understanding of how the criteria for rating loans now compares to the criteria used in the past,  you can't use a back test tool to do anything except to see what might have happened in the past.  

My experience with Peer-to-Peer Lending has convinced me that loaning money to other people is a business best left to those with expertise.  Do you agree?  

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, April 27, 2018

Mutal Funds, ETFs, Closed End Funds--What's the Difference?

One key rule in investing is to not put all your eggs in one basket--or all your money in the stock of one company.  No matter how great the company, no matter how long it has been in existence or how well known it is, it could fail--case in point:  Sears.  While Sears has not yet filed for bankruptcy (at the time of this writing), "word on the street" is that it is coming.  Sears has been a retailing giant since the 1800's and sent packages through the mail long before Amazon came into existence. 

The problem with buying a large number of investments is that researching them and following them takes too much time, even if you have learned how to do it.  Yes, there are investment geeks out there who love reading annual reports, who know what PEG, PE and EPS mean, and who revel in uncovering stocks no one else has heard of, but most of us would rather go to the beach, and outsource the job. Of course investment companies have seen the need and developed products to meet that need.  Today we are going to take a look at three types of products you can buy that basically pool your money with that of other investors to buy shares in many companies.

Open-Ended Mutual Funds:

Open-ended mutual funds are still the most common type of pooled investment vehicle, but Exchange Traded Funds are making headway.

With an open-ended mutual fund, a custodial company develops a plan stating the types of things in which it will invest, as well as the long-term goals.  This plan, which is described in a Prospectus gives investors some idea of what they are buying--is it stocks, or bonds?  Big companies, or little?  Is the goal current income or increasing share price?  Are people picking the investments or is a computer matching an index?

An initial share value is established and as investors send in money, the fund managers invest it per the prospectus.  If the initial share value is $10 and your money gets there the first day, you purchase one share for every $10 you invest.  As the purchased investments appreciate (get more valuable) or decrease in value, each share price adjusts proportionately.  Every day at the end of the day the NAV or Net Asset Value per share is computed.

With open-ended mutual funds, investors can buy more every day, and new shares are created, priced at the same NAV as the old ones are that day.  As more money comes into the fund, the fund managers invest it.  If more investors want to withdraw funds than contribute, then the fund managers have to sell assets, whether or not they think doing so at this time is wise.  As money comes in, the managers have to invest it per the prospectus--for example, if the prospectus limits cash to 10% of the fund assets then once cash reserves exceed 10%, they have to be invested per the prospectus, regardless of whether the managers believe it is the ideal time to buy those investments.  

Open-end mutual funds are the most common investment offered by 401(k) plans.  There are thousands of funds with a variety of investing styles and goals.  Mutual fund investments are made by dollar amount, not by share amount, and most fund companies require an initial minimum investment. 

Exchange-Traded Funds:

Exchange Traded Funds are similar to open-ended mutual funds, except that while mutual funds are valued at the end of the day and everyone who buys and sells shares that day gets the same price, ETFs are valued minute by minute as the value of the owned stocks change.  If you buy an ETF for $10 per share in the morning, I may be able to buy the same ETF for $9.00 per share in the afternoon--or it may cost me $11.00.  

Because the price of the shares fluctuate throughout the day, ETFs are purchased by shares, not by dollar amounts, so you only need the cost of one share to start an investment. They also can be bought or sold almost instantaneously, depending on your broker, so if you want to time the market, or set stop-loss or limit orders you can.  Some brokers charge a commission for buying or selling ETFs, though generally if you purchase directly from the managing company, there is no sales commission.

Closed-End Funds:

A closed end mutual fund is one in which a limited number of shares are sold.  If someone who owns shares in a closed-end fund wants to sell them, they are sold on the stock exchange for whatever price can be obtained, which may be the same, more, or less than the proportionate value of the fund assets.

For example, FundA may be, for simplicity sake, invested 1/4 in ABC, 1/4 in DEF, 1/4 in GHI and 1/4 in JKL today.  The NAV of the shares is $10.00, so each share of FundA represents $2.50 of each company.  Tomorrow, there is really bad news about ABC and the price drops by 20%, and the other companies' price remains the same.  Now, the NAV of the shares of FundA is $9.50.  If FundA was an open-ended mutual fund, and it received my order for shares tomorrow, I would pay $9.50 per share--and that' s what you would receive if you wanted to sell.  However, with a closed-end fund, if I wanted to buy shares in FundA, I would have to go to the stock exchange, and pay the going rate, just as if I was buying the underlying stocks.  It is not uncommon for closed end funds to sell at a noticible discount or premium to the NAV.  If more people want to buy FundA, then the price goes up; if "everyone" wants to sell, the price goes down--however, there are still the same number of shares of FundA in existence, and each share is still invested in ABC, DEF, GHI and JKL.

For fund managers, the advantage of closed-end funds is that they have a set amount of money with which to work.  With open-ended funds, if there is a large in-pouring of assets, then fund managers may have trouble investing it in companies in which they believe and in accordance with the fund prospectus.  Closed-end funds don't have that problem.  In the same way, if too many people want to withdraw money from open-ended funds, the managers can be forced to sell assets when the value is down.  With closed-end funds, the investor might suffer a loss in that situation, but the fund as a whole would not.  

Investors benefit because without having to manage funds coming into and out of the fund, the operating expenses of a closed-end fund are less than that of an opened ended one.  Further, if you are looking for income, closed end funds tend to pay shareholders regularly--passing on both the dividends paid by the underlying stocks and the capital gains earned when stocks within the portfolio are sold.  

I own a few shares in a closed-end fund--Liberty All Star Equity Fund (USA), which is a large cap fund.  Its major holdings include Adobe, Visa, Amazon and Alphabet.  You can read more about it here.   Liberty tries to pay out 2.5% of the Net Asset Value of the fund each quarter to shareholders, which means it is good for those who want income.  Today it is selling for 6.99% less than the NAV.  On the other hand, a sister fund focused more on growth is currently trading at 6.6% more than the NAV.  

I am due to collect a distribution of $0.17 per share.  My shares cost an average of $6.29 each, and closed today at $6.25.  The current Net Asset Value per share is $6.72  

So, is buying this fund a guaranteed 10% return annually?  No.  If the fund does not have enough earnings to cover the distribution, it makes up the deficit by returning capital to the shareholders; in effect giving you some of your money back, which of course lowers the NAV (and probably the market price) of the shares.  Still, if you want to know that on four days of the year, you will receive a check for more or less an amount of money, closed end funds may work for you.

Overall, USA's annualized performance over the last ten  years has been 8%, which is slightly less than the 9.62% return of Vanguard's Total Stock Market Index Fund, and slightly more than the Lipper Large Cap Core Average, which the fund considers to be its benchmark.  
Disease Called Debt

Saturday, April 21, 2018

Stock Screeners

You've decided to do it.  You are going to invest in stock--you are going to buy shares in some company, rather than a mutual fund of ETF.  Now, how do you pick which one.  One way that has been successful for many people is buying what you know--if there is a business you patronize and love, buy a part of it, or at least use a list of such companies to begin your research.

Another way is to set some basic criteria, run some computerized screens on those criteria and then further research the results of those screens.  The advantage of this method is that it can call to mind companies you had no idea existed.  While a computerized screen should not be your only criteria for investing a substantial (definition of "substantial" varies by person) amount of money in a company, computerized screens are good for eliminating companies from consideration.  Let's take a look at some available on-line stock screeners.


Finviz  is the screener that seemed the most intuitive to me.  Above is a screenshot of their screener.  offers both paid and free accounts.  The paid account costs $24.96, and this chart compares the free and paid versions:

To use Finviz, you simply go to their homepage, click on screener and, for the most complete screen, click on "All".  (The other choices are "Descriptive" "Fundamental" and "Technical").  Click the boxes on which you want to screen, enter the criteria that interest you, and then look at the results list.

As an example, I want to invest in a small cap company that is profitable, has increasing earnings per share and has a dividend above 3%.  I'm not saying this screen will result in outsized earnings, I just needed something to start with and that's what I picked. 

Finviz' screener covers 7319 companies.  Screening for small cap reduced the number to 1564.  Asking for dividend yield over 3% cut that to 372.  When I added in positive earnings per share growth this year, the number went down to 148.  Setting "net profit margin" to positive, further reduced the list to 107.

Once I've gotten a number of stocks with which I can work.  I can design my own report using the screening criteria I used, or another criteria.  For example before I buy this stock, I want to know if their sales are increasing, and what the price/earning ratio is.  I go to the report tab, click those buttons, along with dividend yield and then I take a look at my report, which I can then sort on any criteria I've included in the report.  In this case, I decided to sort on Sales Growth in the last five years and Jupai Holdings, a financial management company from China comes to the top. 

Interesting; this would NEVER have come on my radar in much of any other way.  So, should I buy it?  Well, when I click on that stock, I get a page filled with data about it,and a quick eyeball shows that it is a growing and profitable company but that the stock price is volatile and down for the last three months, but that it doubled in the last year. If I continue down the page I see a slew of articles about the company, including one published this week on Simply Wall Street titled Top 3 Cheap Stocks This Month.  There is also a link to their annual report. 

The main downside to Finviz is I think the page is unattractive and hard to read.  Also, unless you buy the premium version there are ads, including videos and I hate video ads. 


Yahoo offers a stock screener as well.  While it does not say how many companies it starts with, when I clicked "Small Cap" I got 5245 results.  When I went to look for dividend yield, I couldn't find it, so I hit control-f and let the computer do it for me.  I found one that was dividend/stock price, so I clicked it.  For earnings per share I clicked net EPS--basic.  The trouble was that once I clicked those, instead of being able to set them where I was, I had to go to another screen, and though I set the dividend screen to what I thought was the equivalent of dividend yield, I ended up with stocks with dividend yields that were less than 3% (and some more) so obviously I did it wrong. In general I had a harder time navigating Yahoo's screener and I wasn't able to select criteria that I knew were equivalent to those I picked for Finviz (and vice versa).  I guess knowing something about finance would be useful. 

For whatever reason, CVA Covanta Holding Corporation was at the top of the list Yahoo gave me.  I clicked on it and was taken to Yahoo's page on Covanta where you can see there is a lot of information, including the fact that it is considered a strong "buy" right now.  This page is easier to read than the individual stock pages on Finviz, and seems to have much of the same information.  In short, I prefer screening the stocks on Finviz, and then reviewing the "winners" on Yahoo finance.  


Zacks is helpful because it defines the various screening criteria and tells you what it thinks are reasonable values.  I screened for market cap under 1000 per their criteria for small cap.  I picked a dividend yield of greater than or equal to 3%.  My screen selected 98 stocks.  Interestingly, neither of the stocks discussed above were on that list.  

Zacks listed the stocks in alphabetical order but allowed me to sort by any of my criteria.  I sorted by dividend yield and the top one was Independence Realty Trust, and clicking on the name took me to Zack's page  on it.  I found the page easy to read and liked the fact that one of the top things you see on the page is Zack's recommendation about the stock--in this case "sell".  The other thing I like is the little  buttons next to some terms.   

While Zack's is selling a premium service and therefore paywalls a lot of their information, there is still plenty available to those who do not subscribed. 

Are there any stock screeners you like to use?

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, April 13, 2018

Robinhood for the Web: My Review

I've written several times about my experience with Robinhood, an online broker that allows investors to buy and sell shares of stock, ETFs, options and even cryptocurrencies without paying a sales commission.  Up until recently, the only weakness I found was that Robinhood required you to use a smartphone app; the website was not much more than a landing screen directing you how to download the app.  However, the last time I went to their website, I found something new, and it looked a lot like what you see above.  Yes,  you can now buy and sell via Robinhood's website.  So, let's take a look at the website and its features.


Beauty is in the eye of the beholder, and this beholder doesn't much care for the black background with white print.

What You Get:

The screen you see above is what I see once I've logged in.  You can see that my portfolio lost value today ($5.52) but then gained in after hours trading ($1.88). On the right side of the screen, you can see a list of the stocks I own, and how much each is worth, as well as a chart showing its progress today (green for gain, red for loss).  

If I click on the symbol for a stock, I am taken to a page like this.  You can see that today, AT&T decreased in value, per the red chart.  It shows that the current value of my AT&T shares is $316.26 and that my average price per share is $36.25.  This screen also tells me that I own 9 shares of AT&T and that they make up 19.04% of my portfolio.  From this screen I can both buy and sell my shares, and it tells me I have $4.12 buying power at this moment.  I would guess that this is all pretty standard stuff for a stock brokerage.

Robinhood has a couple of interesting things on this screen that due to the size of the screenshot, you can probably barely see.  Above where it says AT&T, are the words "100 Most Popular", "Telecommunications" and "Wireless".  These are what Robinhood calls "collections", groups of stocks that have something in common.  Click on "100 Most Popular" and  you get 

This particular collection is a list of the 100 stocks most popular with Robinhood investors.  Besides the current price and how the stock performed today, I can see what percent of analysts recommend the stock.  On the right side of the page is a simple stock screener that I can apply to the current collection. Of those 100 most popular stocks, only are recommended by more than half the analysts.  Of those, only four are small cap companies.  Three of those deal with drugs or health, and one, Plug Power, which I had never heard of before starting this article, provides alternative energy technology.  As happened when I clicked the AT&T symbol on my homepage, clicking the Plug Power symbol took me to a page about them.  

From the AT&T page shown above, if I click on Analysts' Rating, I am taken further down the screen where I see

I like the way it shows both points of view and tells you that 40% of analysts recommend buying AT&T, 57% recommend holding it, and only 3% recommend selling it.  I wish I knew how many analysts they polled, and who they were.  Perhaps Robinhood plans to monetize that information later, but right now, I don't see any way to access it.  Still it is good information to use to screen stocks to pick those worthy of further investigation.

As I continue down the page, I see what is above--a graph of AT&T's earnings per quarter and my history with the stock at Robinhood.  You can see that I will get a dividend on May 1 and if I click the word "Pending" it tells me that I'm going to get $0.50 per share for a total of $4.50.  

Some stocks also have links to articles about the company and its potential as an investment.

Finally, the front page offers me links to articles.  From what I can see, these, shown above,  are just articles of general interest to investors as opposed to articles about my stocks. 

Web or Phone?

I was a late adopter of smartphones--I got my first one a Christmas, and one of the reasons I wanted it was to run the Robinhood app.  At this point, the app is easier on my eyes but the website has more information.  Interestingly, the app also has the black background with white letters and it doesn't bother me.  

Neither "collections" nor analysts ratings have made it to the app at this time, so I think if you are looking for a company in which to buy stock, more information is available on the web (and I prefer a keyboard and screen for any serious research.  

How Does Robinhood Compare to Other Options?


Robinhood wins many comparisons to other online brokers. I have reviewed Stockpile, which offers gift certificates and supervised trading for minors. Robinhood does not offer either one, but it also does not charge $0.99 per trade, and it offers a much larger variety of investment choices.  Stockpile offers fractional shares, whereas Robinhood does not.  Stockpile engages in once per day batch trading, Robinhood offeres real-time trades.   I prefer the appearance of Stockpile's website.  If you want $5.00 worth of free stock, use this link to open a Stockpile account (and I get $5.00 too).  


Motif offers free first opening price trades, or you can pay for real-time trades.  However, if your account is under $10,000 Motif charges you a $10 account fee every other month.  Also, Motif has started charging a fee for owning one of the "motifs" or baskets of stocks that they designed.  Robinhood offers real time trades and no monthly account fees.  While Motif allows the purchase of factional shares, Robinhood, as stated above, does not.  


Vanguard is my favorite mutual fund company, hands down.  They have a large portion of my net worth under their umbrella.  However, I just "tried" to buy stock from them.  The interface was easy, and I had no problem setting up the order.  However, there was a $7.00 commission whether I was buying one share or a thousand.  Clearly buying individual stocks via Vanguard is not realistic for people who don't want to invest a lot of money in any one company.  

How Does Robinhood Make Money?

If a company is going to stay in business it has to make money.  Otherwise, it ends up going out of business, like Loyal3 did, or it has to change its business model and start charging fees.  Motif, for example, used to charge a $9.95 commission to buy or sell a "motif" or basket of stocks, but no monthly fee.  Now they've reduced sales commissions but added a monthly fee for small accounts.  

Robinhood says that they make their money by charging for Robinhood Gold, which is basically a margin account that allows after hours trading, and by the interest earned on uninvested money in stockholder's accounts.  

How to Get Started

If you would like to invest with Robinhood, use my link and we'll both get a free share of stock. The last free share I got was Sprint, which has increased in value by 15% in the last month.  Fill out a few simple forms, link your bank account and you are ready to go.  Robinhood will even let you instantly invest up to $1000 that is en route from your bank to Robinhood.  

While full service brokers may offer features Robinhood does not, if you are looking for a place to dabble in the stock market without paying a lot of fees, Robinhood is a great fit.  

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Saturday, April 7, 2018

Review: 1st Quarter, 2018

It was the best of times, it was the worst of times....where have I read that before?

The first quarter of 2018 was fast out of the blocks.  Our assets increased by almost four percent in January.  Unfortunately, January was followed by February, and then by March and by the end of March we were about equal to were we were at the end of December, except that we had deposited more money.  Let's take a look at the accounts:

Lending Club:

Lending Club in an on-line unsecured lender.  If you want a debt consolidation or vacation loan, give them a try.  They accept applications and underwrite and service loans, but they don't lend out their own money, they lend out the money of investors who invest in particular loans.  If the borrowers default, the lenders lose money.  The hope, of course, is that the interest collected from the borrowers who pay offsets the write-offs.  

According to figures published by Lending Club at the time I started investing, the overall return from which it was hard to stray was about 8%.  Now, that norm is about 5%, which to me is not high enough to make up for the expected drop should the overall economy drop.  Right now, my returns since I started on the platform are about 4.51% if you take into account my expected defaults. That number was 4.58% at the end of the year.  The good news is that for the first time in a long time, I earned more interest than I lost in defaults.  Still, I'm in the process of pulling my money from that account as notes are paid.  


Prosper is a platform similar to Lending Club.  In December I reported "Three months ago my annualized net returns were 5.41%, and my "seasoned" returns--the returns on notes that are more than ten months old were 4.82%. Those figures have dropped to 5.09% and 4.39%, ".  Now, the figures are 4.56% and 3.93%.  Again, this return is not high enough to compensate me for the possibility that defaults will increase due to declining economic conditions.  As I withdraw money from this account it is going into our Roth IRAs.

My 401k

My 401k is invested as follows:
  • MFS Government Securities Fund-A 35.47% 
  • Janus Henderson Triton A 20.24%
  •  Oppenheimer Int'L Small Mid Co A 15.11% 
  • Pioneer Fundamental Growth Fd-A 14.62% 
  • Delaware US Growth Fund-A 14.56%
That's slightly off from my target, but surprisingly, given the last few weeks, it is the stock funds that are slightly overweight, not the bond fund.  Nevertheless, my 401K is worth less than it was when the year began.

Husband's 401k

My husband's 401k is invested about 50/50 in a bond fund and a small cap growth fund through AXA.  The fees are high and the funds mediocre, so he invests the minimum for the company match.  


Vanguard holds IRAs and Roth IRAs for me and my husband and a joint non-IRA account.  Each acccount holds a variety of funds purchased for us by our ex-financial advisor.  I check them quarterly and if any have been significantly underperforming compared to their index, I consider selling them.  Otherwise, I leave them be so as not to pay the sales cost.  Out of 14 funds, 2 are under consideration for sale (we've already sold five or six funds from each account).  

We own several Vanguard funds:
  • VTSAX Vanguard Total Stock Market Index Fund Admiral Shares
  • VTABX Vanguard Total International Bond Index Fund Admiral Shares 
  • VFIAX Vanguard 500 Index Fund Admiral Shares 
  • VDADX Vanguard Dividend Appreciation Index Fund Admiral Shares 
  • VGSLX Vanguard Real Estate Index Fund Admiral Shares 
  • VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 
  • VTIAX Vanguard Total International Stock Index Fund Admiral Shares 
We run our numbers through Personal Capital and it tells us that our allocation is just about right.  


Motif is an online broker that appears to be trying various pricing plans to see what works.  Originally, they were selling "motifs" or baskets of themed stocks.  You paid one commission and you could buy up to 30 different stocks.  Later, they introduced a yearly fee for accounts under $10,000 from whom they got no commissions.  Now, they have a bi-monthly fee on low accounts and they charge a fee per motif if they designed the motif.  On the other hand, if you are willing to accept tomorrow's opening price, you can now buy and sell stocks at no cost, and you can do so by share or by dollar, since you can buy fractional shares.  

With the new pricing model, I sold one motif that was not doing well as a whole.  I am adding money so as to get my account over $10,000 by the time the next bi-monthly fee is charged.  Like the stock market in general, my holdings at Motif have decreased in value, so it seems that I'll about hit $10,000 and then the market will drop.  If you want to invest via Motif, use my link, and you get a month of their premium service, which includes real-time trades for free, and so will I.  


Robinhood is an app-only online broker which allows you to buy and sell stock in real time without paying a commission.  You can also buy and sell options.  I first started investing via Robinhood when the stock market was rising rapidly.  Once a stock appreciated by a few dollars, I'd set a stop loss slightly below that so as to protect my earnings.  For example if I bought a stock for $10.00 and it rose to $12.00, I'd tell Robinhood to sell it if it dropped to $11.00.  As the market dropped, I had several companies end up selling that way, and some I decided to repurchase at a lower price.  Here is my portfolio:

AT&T:   9 shares purchased for a total of  $265.29.  Current price $35.87. .  No stop loss on this one; I bought it for the dividends.  The latest quarterly dividend was $.50 per share, so the current yield is just over 5%
Lending Club:  1 share purchased at $5.51.  Current price $3.41.  No dividends. No stop loss.
Visa:  2 shares purchased at $78.00.  Current price $117.00. Latest quarterly dividend was $.21 per share, up from $0.195 in 2017.  I have a stop loss order placed at $100.00.

Hormel:  3 shares purchased at 33.91.  Sold at $34.00 via stop-loss order.  Repurchased at $31.80. Current price $36.39.  Purchased June 21, 2017.  Quarterly dividend in 2017 was $.17; in February it paid $0.1875.  

Hanesbrands: 2 shares purchased at $21.93 on January 13, 2017. Current price $18.75,  Stop loss set at $18.00.  Dividends in 2017 were $0.15 per share per quarter.  2018 has been the same.  Additional shares purchased February 7 for $21.60 and February 9 for $19.  Stop loss sell of two shares on April 2 for $18 each, repurchased at $17.95. Now my average cost per share is $19.53. 
CVS:  1 share purchased July 3 for $80.77, one share on February 9 for $70 and one on March 13 for $68.66.  Current value $63.49.  $1.00 in dividends in 2017. No stop loss. Quarterly dividends are $0.50 per share.   

Qualcomm: 1 share purchased October 9 for $52.68. Stop loss sell on March 13 for $59.65.  Collected two dividend payments of $0.57.    Current price:  $53.30. 

Mattel: 1 share purchased October 30 for $13.87. Current price $13.15. $15.00 stop loss sale on January 18.  
Ford: 3 shares purchased November 7 for $12.33.  Stop loss sale on January 25 for $11.50.  Repurchased February 1 for $11.00.  Another share purchsed April 5 for $11.37.  No dividends.

Cardinal Healthcare.  1 share purchased November 27 for $56.42.  Stop loss sell February 5  for $64.98 and repurchase for $64.70.   Current value $62.73.  Quarterly dividends are $.46 per share.  

Omega Healthcare Investors.  1 share purchased December 6 for $26.75.  Stop loss sale February 2 for $26.00.    Current value $26.59.  Collected $0.66 in dividends.  
Ascena Retail Group. 3 shares purchased December 11 for $2.00. Stop loss sale of 2 shares on January 9 for $2.05.  Current value $2.18.  
Macquarie Infrastructure. 1 share purchased December 26 for $64.18. Stop loss sale February 6 for $61.85.   Current value $38.39.  

Pfizer.  1 share purchased December 26 for $36.17,  Stop loss sell February 5 for $34.15.  Current value $35.03.  Collected $0.34 in dividends

Gilead Sciences.  Purchased 1 share January 19 for $81.30. Stop loss sell on February 5 for $80, repurchase February 5 for $79,  dividend of $0.57.  

ProAssurance:  Purchased 1 share January 12 for $54.98.  Current value $46.15.

Viacomm:  Purchased  2 shares on January 19 for $33.31.  Current value $30.91

General Electric:  Purchased 3 shares on February 2 for $15.90 each.  Current value $13.08.

Altaba:  Purchased 1 share at $80 on January 29.  Current value:  $67.55.

CBL and Associates Properties:  10 shares purchased between January 29 and April 6 for an average cost of $4.84.  Current price:  $4.59.  Will receive a dividend of $0.20 per share on April 17. 

Game Stop:  Accidentally purchased on January 29 for $17.05.  $0.38 dividend on 3/20.  Current value $13.43.

Sprint:  Awarded one share because someone used my link.  Current value:  $5.15.

Macy's:  Purchased 2/5/18 for $24.00.  Dividend of $0.38 on April 6. Current value: $29.86.  

Government Properties Income Trust: 6 Shares purchased between March 1 and April 4 at average cost of $13.32.  Current value:  $12.50.  

Liberty All-Star Equity Fund:  Ten shares purchased March 13 for $6.40 each; four shares purchased April 2 for $6.00 each.  Current value:  $6.09.  

Most of these stocks were things I read about on various blogs or on Seeking Alpha.  I did not do extensive research,no did I invest a pile of money in any one stock.  I have decided that I have enough now.  If I want to put more money in the stock market, I am either going to buy more shares of what I have, or sell something I have and buy shares in a new company.  If you would like to invest via Robinhood, please use my link.  You'll get a free share of stock, and so will I.  Last time someone used my link I got a share of Sprint.  

How was the first quarter of 2018 for you?   

Disease Called Debt

Friday, March 23, 2018

What Are Options and Should I Invest In Them?

In the investing world, what are options?  Simply put, they are contracts that require the holder to buy or sell a certain stock at a certain price on a certain date.  For example, right now (Saturday morning, 12:03 CDT) the latest price for one share of AT&T is $34.86.  Via Robinhood, I can buy "Calls", which are options to buy AT&T at a certain price, or "Puts" which are options to sell AT&T at a certain price.  


One example is that  I can buy a Call that expires on March 29, 5 days from now, which allows me to purchase 100 shares of AT&T stock for $35.50 per share.  This call will cost me $15.00.  On March 29, if the market price for AT&T is above $35.64, and I still own that option, I make a profit.  I can use my option to buy the shares, and then almost immediately, to sell them (unless I want to own them, in which case I can keep them).  If the market price is below $35.64, I lose money, but my loss is capped at the $15.00 I invested.  In short, it is possible to lose 100% of my investment, but the dollar amount I risk can be less than if I purchased the stock outright.

I can also buy a Call that allows me to by 100 shares of AT&T at $37.00 on January 18, 2019.  That would cost me $132.00 In order for me to break even on this option, AT&T would have to go up to $38.32 on January 18, 2019.  If the market price is more than that, I make money; less than that, I lose money, but whereas my total gain is hypothetically unlimited, my downside is limited to $132.00.  

Once you own a Call, you can sell it at any time before it expires.  For example, if over the weekend AT&T announced that they had invented a super new type of internet bandwidth that was going to revolutionize everything, and investors reacted Monday morning by bidding up the price of AT&T to $50 a share, people would love to get their hands on my option to buy shares at $35.50, and they'd be willing to pay more for it than what I did. I can sell the option to someone else, and make a profit.  The price of call options tends to move in the same direction as the price of the stock.  


Puts are the option to sell 100 share of stock for a certain price.  Right now I can buy a Put that expires March 29 to sell 100 shares of AT&T for $35.00 per share.  The cost of that Put is $59.00.  On March 29 if AT&T is worth more than $35.00 per share, I can buy 100 shares and then sell them immediately for more than I paid.  In order to make a profit (because I did pay for the Put), I need the price of AT&T to drop below $34.42.  With this Put the most I can lose is $59 (my investment) and the most I can gain is $3441 (assuming AT&T drops to zero).  

More long-term, I can buy a Put that expires January 18, 2019 for $348.00.  In this case, I make money if the price of AT&T drops below $31.52.  The most I can lose is the invested $348 and the most I can gain, assuming AT&T drops to zero, is $348.00

Like Calls, Puts can be sold at market rates, at any time before they expire.  The lower the price of the stock goes, the more valuable Put options become.  

But Why?

Why do options trade?  What is the point?  To make money of course.  If I own a stock and sell a call option on it, I collect the sale price.  Using the example above, if I had been the originator of that March 29 call option and it originated today, I would collect 15 cents per share for those one hundred shares.  At that point, two things could happen.  First, the stock could end up below $35.50, in which case I keep my fifteen cents and I can keep my stock or sell it at market price.  The other thing that could happen is that it sells for more than $35.00, in which case I have to sell it to the holder of the call for $35.00 per share.  Basically I say that in return for getting 15 cents per share now, I am willing to limit my upside.  If the stock goes through the roof, you are the one that gets the extra profit.

Please note however, that one I (the owner of the shares) sells you an option, you are free to sell it to others.  Selling to option to others does not obligate you to provide shares to the person who owns the option at expiration.  

Options allow investors who own stock to give up some possible profits in return for a known payment.  Options allow other investors to invest relatively small amounts of money and to possibly gain a lot.  Trading options--buying and selling the options only, and not owning the underlying stock, is a high-risk high-reward (and high loss) way of investing. 

How Do You Invest in Options?

Most brokerage houses allow options trading, though the SEC has more stringent requirements for trading options (which can and often do expire worthless) than for trading stocks.  While I have never traded options, my Robinhood account was just enabled for them.  I'm going to study the types of trades and the risks involved a while longer before investing.

If you would like to get a free share of stock, sign up with Robinhood, an online brokerage firm that charges no sales commissions.  If you sign up, we both get a free share of stock.  
Disease Called Debt

Saturday, March 17, 2018

Skills You Need that Girl Scouts Learn Selling Cookies

If you are like most people in the country, at some time in the last month or so you have been approached by a cute young salesperson and asked if you would like to buy some Girl Scout Cookies.  Make no mistake about it, Girl Scout Cookies are big business for the Girl Scout Councils (local non-profit corporations that recruit and train leaders and girls, provide programming, administer the program locally and own and operate Girl Scout camps).  My council gets 2/3 of its revenue from product sales, the overwhelming majority from cookies.  However, cookies are not just fundraising, cookies are part of the Girl Scout program, and much effort has gone into making the necessary evil of fundraising into an educational experience for the girls.  Our Financial Literacy program teaches skills that all adults need, particularly in dealing with finances.

Skill #1—Goal Setting

One of the first things each Girl Scout is asked to do each cookie season is to set a goal.  For the little ones, the goal is often  a trinket on the prize sheet but when we talk about cookies we talk about things they would like to do and how many boxes of cookies it takes to make that happen.

Studies have shown that people with clean financial goals get further than those without them.  Having something to aim for gives you direction, and achieving small goals gives a sense of achievement.

Skill #2—Decision Making

Even in high-selling troops, cookie money is limited, and the girls are supposed to have a major voice in how it is spent.  We sold enough cookies to go to the zoo or to the aquarium, or to have a painting party.  Now we have to pick.  

One of the reasons people get in debt is because they don't make decisions, or at least don't make good ones.  They pick the zoo, the aquarium and the painting party, even if they only have money for one.  

Skill #3—Money Management

As girls get older they are expected to take on more and more of the financial management of their troops.  They learn how much money is spent on un-exciting things like copies, training, or meeting supplies.  They learn to budget the cookie money, plan fundraisers, and allocate funds to both needs and wants.

The bottom line on budgeting is allocating limited cash, and much of it has to be spent on boring things like the electric bill or insurance.  When there isn't enough money for the things you need or want it is time for a second job or a side-hustle of some sort.

Another money management skill the girls learn is how to count money.  Don't laugh, so many of these girls (mine included) have come up in a world where payments are made via credit/debit card and cash is rarely seen.  While being able to count back change may not be as useful a skill as it once was, it is still needed.  Talk about a real-life math lesson--and yes, the adults do watch the cash box but the older the girls get, the more they should be handling the money.  

Skill #4—People Skills

In order to sell someone cookies, you have to ask.  I tell the teens "Make them tell you 'no', often they will decide it is easier to say 'yes'".  They notice that while there are people who actively seek out cookies, there are others who don't look at the table until someone says something.  Girls learn to talk to strangers, to explain their product and to upsell--"your four boxes are $16, would you like to make it 5 for an even $20?".  They learn to say "thank you" or even "thank you anyway". We have girls who really hustle cookie season after cookie season and sell thousands of boxes of cookies.  Wouldn't you like to hire one of them for a sales position with your company?

Skill #5—Business Ethics. 

The Girl Scout Law says we will be honest and fair, and we enforce that during cookie season.  While we upsell, we do not "forget" to give people change, though often they offer that $1 as a donation. We help our fellow Girl Scouts and we put a lot of emphasis on following the rules. 

I'm a paralegal and I do criminal defense work for people who can afford to pay big bucks, usually because of success in business.  I wonder how many of them wish, after they have need of our services, that they had been more honest and fair, friendly and helpful, considerate and caring?

Yes, the girls learn a lot by selling cookies, but I for one am glad cookie season is over for another year--and glad that my daughter's trip to New York this summer will be about 1/3 paid for with cookie money.  
Disease Called Debt

Friday, February 23, 2018

It's Girl Scout Cookie Weekend

Guess what I'm going to spend the weekend doing?  Yes, this Girl Scout Leader/Mother will be supervising as her daughter works cookie booths.  No matter where you live in the U.S. our goal is for you to be accosted approached by a charming Girl Scout who is practicing her real-world skills of goal setting, decision making, money management, people skills and business ethics.  As leaders are told time and again, cookies aren't just fundraising, cookies are Program.

Different troops give different amounts of emphasis to cookies, though often cookies are what people think about when they think about Girl Scouts.  Unfortunately, fund raising is necessary for most youth activities or only kids whose families have money could participate in many things.  Since you will hopefully be asked to buy cookies this weekend, I though I'd tell you a little about them.

Who Gets the Money for Girl Scout Cookies?

The lion's share of the money earned by Girl Scout Cookies goes to local Girl Scout councils.  These non-profit corporations are responsible for recruiting and training leaders, recruiting girls, providing programming, enforcing standards and they are the entities that own and operate Girl Scout camps. 

Councils employ both professional year-round staff and temporary camp counsellors, and for most councils, employee pay is one of the biggest expenses.  Of course the other big expense is the camps.  My council owns three of them and they are well-equipped facilities with full kitchens, cots with mattresses, cabins and platform tents. One has horses which have to eat daily, even if girls are only at the camp on the weekend.

The amount of money that goes to the troops--the groups of girls who actually sell the cookies varies depending on the council and on the incentives set by the council.  Here, we sell for $4.00 per box and our troop proceeds start at $0.50 per box and can get up to the mid 60's depending on the number of boxes sold, whether we participated in fall product or registered early last year and whether we waive prizes for individual girls.  Individual girl prizes cost about five cents a box.  

In some ways, that doesn't sound like much, but when you figure that around here, selling 100 to 200 boxes isn't a stretch, tell me another fundraiser we could do, especially with the under ten set, that could earn us $50 to $100 per girl, mostly from people who are not family members. My daughter has a friend who really needs fundraisers in order to take the troop trips and she regularly sells over 500 boxes a year.

How Much Do Girl Scout Cookies Cost?

It depends on local councils.  They each negotiate with the bakers (there are two bakers that make Girl Scout Cookies) for the best price/terms they can get.  Then they look at their needs vs their expected sales vs what they think the market will bear, and after factoring all that in together, arrive at a price.  Right now, most councils are at $4.00 a box for most cookies and $5.00 a box for gluten-free cookies.  I've heard one is as low as $3.50 and some are $5.00.  

Do Girl Scout Cookies Support Any Groups but Girl Scouts?

Not directly.  As noted above, most money goes to the councils and the councils do not donate money to any other groups. Troops are encouraged to use part of their cookie proceeds for service or "Take Action" projects.  Generally speaking, troops are not allowed to donate money to another organization or individual.  They are allowed to use troop funds to purchase things for other groups.  

What If I Gave Up Sweets for Lent?

Girl Scout Cookies freeze well.  

Can Vegans Eat Them?  What About People Who Keep Kosher?  Those Who Can't Have Gluten?

Both bakers have some vegan cookies.  If girls in your area are selling Samoas, Tagalongs and Do-Si-Dos,  you live in a Little Brownie Baker council.  Little Brownie Baker's Thin Mints are vegan.  All Girl Scout cookies baked by Little Brownie Bakers are certified as kosher dairy; except Thin Mint cookies which are certified Kosher Pareve.   Little Brownie Bakers offers Toffee-tastic® cookies, which have been certified gluten-free by the third-party organization, NSF (National Sanitation Foundation) and verified through testing as meeting the FDA guidelines for labeling gluten-free

If the girls in  your area are selling Caramel Delights and Lemonades, you are in an ABC Baker council.   Girl Scout S'mores™, Lemonades™, Thanks-A-Lot®, Thin Mints and Peanut Butter Patties® are made with vegan ingredients.  ABC also offers the Gluten-Free Trios Girl Scout Cookie, which is certified by the Gluten Free Certification Organization, produced in a dedicated gluten-free facility, and meets a 10 parts per million standard set by the Gluten Free Certification Organization.

While ABC's cookies made with vegan ingredients do not contain any animal product ingredients, they may be produced on equipment that is also used to produce items containing dairy ingredients.

But I Can't Eat Cookies Because...

Those charming sales associates in Girl Scout vests or tshirts should be able to offer you an alternative--if you can't eat them, treat them.  Each troop picks a charity to receive cookie donations.  These range from food pantries and homeless shelters to our overseas troops.  

Happy Girl Scout Cookie Weekend; enjoy your cookies!
Disease Called Debt

Friday, February 16, 2018

Low Cost Brokers: Robinhood vs Motif vs Stockpile

Until recently, one thing that kept small investors from investing in individual shares of stock vs mutual funds was the fees charged.  Most brokerage houses had a minimum fee per transaction and if that transaction only involved a few shares, the fees made it cost-prohibitive.  The advent of the internet and electronic trading has made it possible to reduce those fees considerably, to the point that it is possible to buy a single share of stock in one company or even fractions of shares.  Let's take a look at a few of the companies set up to serve small investors.


Stockpile charges $.99 per trade, and offers a large selection of stocks, though not the entire market.  The market they seem to be trying to reach is that of the young and inexperienced investor.  Stockpile's website includes a "Learn" section which includes articles on such topics as "What is an Exchange?" and "What Is NASDAQ?".  The articles are short, informative and easy to read.

Another way Stockpile reaches small investors is by offering fractional shares.  As of this writing, Amazon stock costs $1448.69, which is more than I want to invest in any one company.  Stockpile allows me to pick any dollar amount to invest, so that I could invest $145 and get 1/10 of a share of Amazon, or $14.50 to buy 1/100 of a share.  

A unique feature of Stockpile is that they offer gift cards, either physical or virtual.  With Stockpile I can choose to give you stock in Disney rather than Disney bling.  However, when you go to redeem the gift card, you are allowed to invest that money in any stock you please, so if you prefer Universal to Disney, go ahead and switch (and you don't even have to tell me).  

Stockpile does not charge account maintenance fees and they do not offer IRAs.  However, they do offer custodial accounts for minors.  With these accounts, an adult custodian is responsible for the account, but it is owned by the minor.  Minors can be given their own log in information.  The only difference is that when a minor tries to enter a buy or sell order, the request is routed to the custodian for approval.  

If you want to get started with Stockpile, clicking this link will give you $5.00 worth of whichever stock you want.

The main disadvantage of Stockpile is that trades are made at the closing price the day you order them.  You cannot make a quick choice to get out NOW, and, if the market drops noticeably between the time you requested the trade and the time it executes, you may find that you don't get the price you were expecting.

Stockpile charges $.99 per trade, so if you are buying a very small amount of stock it could get expensive on a percent of assets basis.  I recommend a minimum investment of $100.00.  Other fees include a 3% debit/credit card fee (though you can transfer money from your bank account at no cost) and a $2.99 gift card fee.  While there are other fees, these are the ones most investors will be most likely to see.


Motif's claim to fame is enabling small investors to buy fractional shares of a variety of companies in one basket, dubbed a "Motif".  Motif offers some professionally designed motifs as well as many designed by ordinary people.  If you design a motif and convince others to buy it, you will get a sales commission.

The minimum amount of money necessary to invest in a motif is $300, and each motif can contain up to 30 different stocks.  

Motif recently changed its fee schedule.  Now, you can get commission-free next market open trades of both individual stocks and professionally designed motifs.  If you want to trade in real time, professional motifs will cost you $9.95 per motif, a motif you build is $19.95 per trade or if you want to trade single stocks, the fee is $4.95 per trade.

For larger or more active investors Motif offers "Impact" or "Motif Blue" accounts.  An "Impact" account is a fully-automated portfolio what is automatically rebalanced and which has a composition that changes as you age.  Regarding the cost of an Impact account, Motif says "The fee structure for a Motif Impact account, that provides a fully automated portfolio aligning your financial goals with your values, is 0.25%, expressed as an annual fee rate."  A "Motif Blue" account is one in which you pay a $19.95 per month fee in exchange for three "free" real time trades per month, plus real time quotes.  If you would like to try Motif Blue, click this link and you will get three months free.  

Motif is now charging $10 per quarter for each account that is under $10,000 and which has had no commissioned trades in the last three months.  In my opinion, that cost is high, percentage-wise, if your account is much under $5,000.  

Right now I own eight professionally designed motifs, most of which were purchased when Motif was offering them at no commission as "motifs of the week".  I also own one that I designed, which I did pay a commission to purchase.  Today I made my first use of the commission-free trade service and used my accumulated dividends to buy a fraction of a share of NVIDIA.  

If you would like to try Motif, use this link; you'll get three months of Motif Blue (and then you can decide whether to keep it or not) and I'll get one.

Motif's strength is allowing you to spread a moderate amount of money among a large number of stocks for a relatively low amount of money.  However real-time trading will cost you, and fees will disproportionately affect small accounts.  


Robinhood is a smartphone app only (for now) brokerage.  They are planning a webpage but it is not live yet.  The app is available for both Apple and Android phones.  

While Robinhood does not offer IRAs, it offers margin accounts and is in the process of rolling out options trading and crypto-currency trading.  

Stock trades on Robinhood are in real time but most users are not allowed more than three day trades (buying and selling the same stock on the same day) per five day window.  Trading on Robinhood is commission free, which makes it easy to buy and sell one share of stock at a time.  

One nice feature is "instant deposit".  Once your bank account and Robinhood are linked, you can deposit up to $1,000 into your Robinhood account and have instant access to it.  When the market fell quickly last week, I deposited an additional $200 in my account and went shopping.  I did not have to wait for the check to clear.

Robinhood offers a margin account, known as "Robinhood Gold" Besides allowing you to borrow money with which to buy stocks, a Robinhood Gold account allows you extended trading hours and a larger instant deposit.

I find the Robinhood interface to be easy to use.  When I log in I see my account balance, along with how much it moved that day.  As I scroll down I see each company in which I own stock with a notation of how many shares of each I own.  There is a small graph that shows whether the stock is up or down for the day, and the latest price per share.  If I click on any company, I get a graph that shows its movement in the last day, week, month, three months, year and five  years.  I can click to buy or sell.  I can scroll down and see what my equity value (shares times share price) is, and how much my average price per share was, and my percentage return both in total and today.  I can see my history with the stock, along with an earnings chart.  Often there are links to articles about company.

If you would like to invest via Robinhood, use this link and we both get a free share of stock.

So, Which Is the Best?

Honestly, it depends.  I have accounts with all three.  Right now, I have little reason to use Stockpile.  My Motif account is almost $10,000 and with their new pricing structure, I plan to bring it up to that level soon, thereby eliminating the quarterly charge.  For people who have an account big enough to avoid Motif's fee, I'd recommend using it to purchase fractional shares, as you can do so without commission.  If you do not have that much money and want to be able to purchase fractional shares, I'd recommend using Stockpile for that purpose.  

For purchasing shares in companies you can afford to buy full shares of, I'd recommend Robinhood.  It is free, easy to use and trades in real time.  The only downside is that you have to use a smartphone, at least right now.  

Motif is the only one of these companies that offers IRAs, but unless you have $10,000, the fees get high.

If you are interested in opening an account with one of these companies, please use my referral links.

Disease Called Debt

Saturday, February 10, 2018

Ouch! That Hurt!...or Did It?

In case you've been under a rock, or never look at the financial news, let me tell you--the stock market took a dive this week.  While I can't speak for everyone, I can tell you that with our diversified portfolio, we lost everything we've gained since Thanksgiving.  Put another way, we lost five percent of our invested assets.  OUCH, right?

Well, we had just passes a milestone, so it isn't fun to see it slip out of our hands, but on the other hand, none of that money was earmarked to pay bill this month or even this year.  At this point, other than a few small dollar stop-loss sales, we haven't LOST anything except on paper.  We still have the same number of shares of stock or mutual funds.  While there are a lot of factors that do into the calculation of dividends, this week's pullback isn't making companies cut dividends,  In short, unless we need to sell, this pullback is not going to change anything.

According to the front page of my 401k's website, last month my 401k, which includes about 30% bonds , gained 3.8% in January.  Think about that--annualized, that is over 45%.  It doesn't take a genius to figure out that such increases couldn't continue long-term..

There are two major reasons stock prices fall.  The first is a real or perceived flaw in a particular company.  For whatever reason "everyone" decides that XYZ is over-valued and they reduce the money they are willing to pay for it. These reasons run the gamut from poor earnings to a new competitor to investors believing the market for XYZ products has dried up.  If shares of most other stocks are going up in price (or holding steady) and XYZ is dropping, beware XYZ, unless you know something the general public doesn't.  Yes, it may rebound, but there is a reason all those professionals don't want it.

The second reason stock prices fall is because the market as a whole is dropping; often due to some news or economic trend.  When that happens, it is like your favorite store putting a great big "Sale" sign in the window.  The shares that cost $17.00 yesterday cost $15.00 today, but nothing has really changed about the company.  It is still selling the same widgets, it still has the same managers, and that means, in my opinion (and I'm not a financial professional and only play like I know stuff here on this blog) that it is time to buy.

Now is not the time to change your 401k asset allocation to all bonds.  Now is not the time to sell all your stocks.  You picked your asset allocation for a reason.  Unless something in your life has changed, that reason should still be valid.  If anything, now is the time to see if you have a few extra dollars laying around with which you can buy stocks or more mutual fund shares.

Last week I wrote about AT&T.  I bought my first two shares in November, for $37.67 each. Since then each share has paid me dividends of $2.46.  Last year the dividend was $.49 per share; in February it went up to $.50.  Earnings per share are up in the last year.  On February 1, shares closed at $39.16; on February 8, they closed at $35.57, over 9% lower.  Did something happen to AT&T? Did a deal fall through?  Was the CEO caught with his pants down?  Were they sued?  Nope.  There is always some news about a company that big, but the bottom line is that this price differential has little to do with the value of AT&T and everything to do with market conditions.  

What did I do about it?  I bought more shares.  On February 6, I bought a share at $36.00; on Feb 7 I bought one at $37.00, and on Feb 6 I bought 2 at $36 and on at $35.95.  Now my average cost per share is $36.61.  Assuming a $.5 dividend per share per quarter, (and everything I've read leads me to believe that dividend is safe) I have a 5.4% return on my money, as long as the price eventually goes back up (which I think it will). 

Since  Robinhood allows me to purchase individual shares of most companies in realtime for no commissions when the market drops like this, I pulled out my phone, transfered money from my bank account to Robinhood and set a limit order (told Robinhood to buy a share for  you if the price drops to a certain point).  If you want to try Robinhood use my link and you'll get a free share of stock, and so will I.  Last time someone used my link I got a share of Sprint.  I don't know what the other person got, but if I was you, leave a comment and let me know.  

Basically what I'm trying to say is that while most people will say their goal is to buy low and sell high, research indicates that most people do the opposite.  In January "everyone" was buying, and stocks were getting more expensive by the day.  In the last two weeks the price has dropped and people want out, and I'm buying.  Are you?
Disease Called Debt