Friday, July 13, 2018

Review of M1 Finance--You Can Get $10 of Free Stock

As an investor, minimizing fees is one of my goals.  Most research has shown that paying more investing fees does not result in better outcomes for the investor.

The internet and computerized trading have made it possible to buy and sell securities for no or low fees.  I've written previously about Robinhood, Motif, and Stockpile.  None of those companies would have been economically viable twenty years ago.  Recently, another competitor to them has emerged, M1 Finance.

What is M1 Finance?


M1 Finance is an on-line stockbroker whose specialty is "Pies"--portfolios of multiple stocks and/or ETFs, which can be purchased for no commission or trading fee.  When you open your account, you decide what percent of your money you want allocated to what security.  You can decide whether you want one "pie" (proportionately divided portfolio)  or several.

For example, you could decide that you want your money invested 25% in Amazon, 25% in CVS, 10% in AT%T, and 40% in Vanguard's Total Bond Market ETF.  You would design a "pie" with those percentages and then send M1 some money--$100 minimum to start--and it will be invested that way.  M1 allows investment in fractional shares, and only invests at the first morning opening price.

Keeping Your Account In Balance


Obviously, your pie is not going to stay perfectly balanced for long.  One of those slices is going to outperform the others, expanding its slice and decreasing theirs.  However, when you deposit more money, M1 uses it to put your pie back in balance.  If stocks have fallen, and the bond ETF is now 50% of your pie, your new money will go into stocks until such time as your ratios are back on track.  If you have basically good securities in your pie, this technique helps you buy low.

Of course the other side of that equation is to "sell high".  If you want to withdraw an amount of money (as opposed to wanting to liquidate a particular position), M1 Finance tries to do so in a way that keeps your pie balanced and is tax-advantageous.  However, it does not offer automatic tax loss harvesting.

Finally, M1 has a button you can push to re-balance your pie.  

Opening an Account


Opening an account with M1 Finance is easy.  Go to their website, create an account, link your bank account and then verify the micro-deposits--nothing you haven't done with any other online financial account.  Make your first deposit, which can be as little as $100.

Adopt a Pie


M1 Finance offers "Expert Pies" designed by their firm, or you can create your own pie.  If you have not already done so, when you log on you'll see a button to create a pie, and once you push it, you'll be taken to a screen called "Add Slices".  From there, you can choose stocks, funds, expert pies,my pies or watchlist.  

If you select an expert pie, you are taken to a screen that briefly describes the types of expert pies.  Two are "Income Earners" and "Hedge Fund Followers".  If you click on one of those it takes you to a list of pies.  The list shows the number of holdings, the dividend yield, a performance graph, performance in the last 1, 3 and 5 years and a risk rating.  Selecting one of the pies takes you to a screen that shows the holdings, a description of the pie and a description of the methodology used to select the holdings.  

Some of the pies use stocks, others use ETFs and still others a combination. 

Target Date pies come in five year increments in conservative, moderate and aggressive flavors.  As the target date nears, the portfolio is automatically moved to a more conservative posture.  

Bake Your Own Pie


I've said it before and I'll say it again, even though I'm not an expert and nothing you read here should be construed as financial advice, the majority of your retirement money should be in a diversified portfolio of index mutual funds and/or ETFs.  However, if you want to put a few dollars into individual stocks of your own picking, M1 allows you to do that as well.

If you select "Stocks" in the "Add Slices" screen, you are taken to a stock screener where you can choose to invest in any of 4,258  companies. To help you narrow your search, there are some basic screens such as market capitalization, P/E Ratio, Dividend Yield and Sector.  

A search for Consumer Defensive companies that pay a 3% dividend or more, got me 28 choices.  Since more is better, I sorted by dividend yield, and then looked at the list.  The highest yielding company was Keurig Dr. Pepper but year to date, it was down 72%.  Continuing down the list, United Guardian was 28.2% ytd, and still pays a 5.07% dividend, so I clicked on it, which took me to a page with basic information about the company.  I learned that though it was up this year, long term, things don't look so good.  

If I want to search for a particular stock, I can do that too.  A nice thing about M1 finance is that you do not have to buy an entire share of stock; if you want to invest $100 in Alphabet (Google) you can buy 0.17 shares.  You do not have to wait  until  you have $1188.82.

In any case, I can select up to 100 different securities per pie, and you can create pies until you have amassed 500 different securities. You can decide the weight you want each to have in your pie.

Types of Accounts


Unlike some other no-fee brokers, M1 Finance offers a variety of types of accounts.  You can open an IRA, a Roth IRA, a SEP IRA or a Trust Account. While you cannot open a Custodial Account now, M1 plans to make them available soon.  

M1 Finance is making a bid to be your main broker. While they do not currently offer options trading, and while they only trade at market open every day, they offer a wide variety of stocks and ETFs.  

Fees


M1 does not charge a sales commission or an account fee, even with IRAs.  They do charge interest on margin accounts (accounts that let you borrow money to buy stock)  There are a few services for which they charge fees and you can see them here. 

Get $10.00 in Fee Stock


M1 Finance is giving $10.00 worth of free stock to anyone who uses this link (or the other links in this post) to open a first account with them--and they'll give me $10 too if you do.  It takes about two weeks for that money to hit your account, but can you tell me another safe investment that will pay you 10% in two weeks (if you invest the minimum of $100)?  


Disease Called Debt

Friday, July 6, 2018

Mid-Year Review of Investments

Like many financial bloggers, I'm taking a little time now that 2018 is half over to look at how things have gone for us so far this year.  Luckily, the answer to that question is "just fine, thank you".  Our net worth is higher than our next worth at the end of the year, plus what we have saved, so we are moving in the right direction, though like most people with money in the stock market, we haven't gotten rich.

About 10% of our income automatically goes into our 401k accounts, and we managed to save 5% of our income beyond that.

On the spending side, we have paid for a beach vacation for me and my husband and for part of a trip to New York for me and my daughter, besides the normal day in and day out bills.

Let's take a look at the investments:

Vanguard:

My husband and I have Roth IRAs and regular IRAs, and a taxable account.  We deposited money in each Roth IRA this quarter and the money was taken from Lending Club and Prosper.   These accounts consist of a variety of mutual funds purchased for us by our ex-financial advisor, along with Vanguard's International Bond Index Fund, Total Stock Market Index Fund, 500 Index Fund, Total Bond Market Index Fund, Dividend Appreciation Fund, Emerging Markets Fund (new this quarter) and REIT Index Fund. In the last year, our rate of return has been 6.3% overall, but year-to-date, our returns are negative. 

One interesting figure Vanguard puts on its statements is your estimated yearly income and estimated yield from each fund, and for your account as a whole. Here are the figures for our accounts:

  • My IRA:  Estimated yield 2.24%
  • My Roth IRA:  Estimated yield 1.99%
  • Husband IRA:  Estimated yield 2.88%
  • Husband Roth IRA:  Estimated yield  2.67%
  • Taxable Joint Account:  Estimated yield 1.6%

My husband's IRA is the largest of these accounts and his return figures are higher than the other accounts because our REIT fund shares are in his accounts and they are high-yielding (4.59%).

MFS:

My 401k has a year to date positive return.   It is invested in Janus Triton,  Oppenheimer Int'L Small Mid Co A, MFS Government Securities Fund-A , Pioneer Fundamental Growth Fd-A,  and Delaware US Growth Fund-A.  My firm contributes 5% of my salary, and I contribute 6%.  Dividends this year totalled about 1/6 of my take-home check.

AXA:

My husband's 401K is with AXA and it has increased in value, though not a lot.  He puts in the minimum necessary for employer match.

Motif:

It is interesting how changing the fee schedule changes my behavior.  Initially, Motif charged a transaction fee when you purchased stock, and that was it.  I invested via a few large chunks of money and then withdrew my dividends and invested them elsewhere.  Then Motif instituted periodic fees for accounts under $10,000.  I left the dividends in the account and deposited more money to bring the account to $10,000.  Next,  Motif started offering free opening price trades, so I used them to buy individual stocks.  When they instituted fees on Motifs (baskets of stocks) they designed, I looked at the ones I had, and sold the underperformers.  Now my Motif account has the following:

  • Buyback Leaders:  A collection of companies that were buying back their stock.  While it has been pretty flat this year, overall, since 2014, it has increased in value over 90%, mostly because of NVDIA, which is up over 900%.  
  • Growing Dividends:  A collection of dividend paying stocks.  It is up about 27% since purchase, whereas the S&P is up 42%.  However, it yields over 2% in dividends yearly.  Most of the stocks that are down are retail stocks, and they are actually gaining a little ground lately.
  • High Yield Dividend:  Another collection of dividend paying stocks.  It is up 16% vs 39% for the S&P, but the average dividend yield is over 3% per  year.
  • Online Gaming World:  This collection of gaming stocks such as Activision/Blizzard, Weibo, and Cheeta Mobile is up over 148% as opposed to the S&P's 37% gain.
  • Things I Like:  I designed this basket, and a lot of it is retail stocks, which I bought at the wrong time.  It is up 10.4%, as opposed to the S&P being up 38.3%.  My winners were Alibaba and Alphabet and my losers are Lending Club and Ascena (Dress Barn/Ann Taylor etc)
  • Online Video:  Includes Netflix and Adobe.  Up 153% as opposed to 37% for the S&P. 
  • Low Beta:  These companies, including McDonalds, are supposed to have a low correlation to the market as a whole.  They pay really good dividends (average is probably close to 4%).  The Motif is up 10.8% whereas the S&P is up 37%
  • NVDIA:  This is a chip maker whose stock increased tremendously in 2017.  When I sold a couple of motifs, I used some of the money to buy more stock in this company. Unfortunately, it has been flat since then.  
  • Adobe:  Another stock that was great last year, but is down since I bought it.
  • CBL:  Up over 27% since I bought it.  This is a mall REIT and pays a dividend over 17% of current price.  
  • Amazon:  Up 7.4% since I bought it.
  • Energy Transfer Partners:  Owns natural gas pipeline etc.  Up 8.52% since I bought it and the dividend yield is over 12%
  • GOV is a REIT that owns buildings rented to government agencies.  Up 30% since I bought it.  Current dividend yield is over 9%
  • Johnson & Johnson.  Down 2% since purchase.
  • Realty Income:  REIT.  Up 2.52% since purchase. Dividend over 4%.
  • Southern Company:  Power company.  Up 6.82 since purchase.  Dividend over 4%
  • Starwood Propertiess (hotel and resort REIT).  Up 1.48% since purchase.  
  • Visa.  Up 3.04%.  I'm dripping all my Motif dividends into Visa right now.  Current dividend 0.6%. 
  • Weibo:  Chinese company that made me a lot of money last year in the online gaming Motif.  However, since I bought these shares they are down.33.8%  Talk about a hit!
  • Walgreens:  Down 11.4%, but at least it pays a 1.87% dividend.  The company is making money so I'm hoping this turns around.  

Lending Club:

While my returns have been steadily dropping for  months, accounting for expected defaults, Lending Club estimates my return since I began the account at about 4.66%   whereas three months ago I wrote that it was 4.58%.  However, so far this year, I've lost more money to defaults than I've made in interest.  Definitely not what I had in mind.

 As my notes mature I'm moving the money to our Roth IRAs. . The economy on the whole is fine now; if I can't make money with Lending Club under this economy, I'm going to lose it big time if things go downhill.  The profits today do not justify the risk.

Prosper:

My returns here have dropped as well.  Three months ago my annualized net returns were 5.09%, and my "seasoned" returns--the returns on notes that are more than ten months old were 4.39%. Those figures have dropped to 4.08% and 3.93%.  As I receive payments from Prosper, they are going to our Roth IRAs.

Robinhood:

I play with this account.  If I read an article about a stock that catches my eye, I'm likely to buy $50-100 worth for this account.  So far, I've invested a little under $2,000.  I usually set stop losses to I don't lose too much if the market goes down (and a couple of times I've repurchased for less after a stop-loss sell.  I ran the account through an XIRR calculator and I'm beating the S&P though not by much.

  • AT&T:  10 shares, average price $35.82,  Current price 32.68.  Dividend is $0.50 per share per quarter . No stop loss on this one; I bought it for the dividends.
  • Lending Club:  1 share purchased at $5.51.  Current price $3.74.  No dividends. No stop loss. 
  • Visa:  2 shares purchased at $78.00.  Current price $131.45.  $1.38 in dividends in 2017 and $0.84 so far this year. . I have a stop loss order placed at $125.00.
  • Hormel: 3 shares purchased at $31.80.  Current price 36.82.  2017 dividend was $0,51 per share; current quarterly dividend $0.56 per share.
  • Hanesbrands: 7 shares, average cost $19.20.  Current price $22.12,  Stop loss set at $19.70.  Dividend is $0.15 per share per quarter. 
  • CVS:  4 shares, average cost 70.64.  Current value $64.66.  Dividend is $0.50 per share  per quarter.  No stop loss.  
  • Qualcomm: 1 share purchased October 9 for $52.68.  Collected $1.14 in dividends before stop loss sale for $59.65.  
  • Mattel: 1 share purchased October 30 for $13.87. Current price $16.63. Stop loss sale for $15.00 on January 18. 
  • Ford: 3 shares purchased November 7, 2017 for $12.33.  Stop loss sell for  $11.50 on 1/25/18.  Repuchase for $11.00 on 2/1/18, and another share on August 5 for 11.37.  $0.15 per share in dividends. and then sold (stop loss) 6/25/18 for $11.40.  
  • Cardinal Healthcare.  1 share purchased November 27 for $56.42. Sold 2/5/18 for 64.98.  Repurchased on 2/5 for $64.70.  Stop loss sold again on 3/20 for $67.00, and repurchased for $66.50.  Quarterly dividend is $0.46.  Current price $49.50.
  • Omega Healthcare Investors.  1 share purchased December 6 for $26.75.  Current value $31.70. but my $26.00 stop loss executed on Feb 2 and I did not re-buy.  I did collect $0.66 in dividends so I'm only out a few cents.          
  • Ascena Retail Group. 3 shares purchased December 11 for $2.00.  Current value $3.79.  Stop Loss at $3.50.  
  • Macquarie Infrastructure. 1 share purchased December 26 for $64.18. Sold via stop loss on 2/6/ at $61.85.   Current value $42.82.  
  • Pfizer.  1 share purchased December 26 for $36.17,  Current value $36.35 but I sold on February 5 for $34.15.       
  • Giliad Sciences.  1 share purchased 1/19 for $81.30.  Stop loss sell 2/5 for $80.00. Repurchase for $79.00.  Quarterly dividend is $0.57.  Current value 71,33
  • ProAssurance.  1 Share purchased for $54.98.  Pays a quarterly dividend of $0.31 but its value has fallen to $36.05.  I should have set a stop loss.  
  • Viacom:  2 shares purchased for $33.31 each.  Current value $29.41.  Quarterly dividend of $0.20 per share.  
  • GE:  Another dog.  Purchased 3 shares at average cost of $15.90. Current value $13.41.  Quarterly dividend of $0.12.
  • Altababa:  Purchased 1 share for $80.00.  Current price $73.33.
  • CBL:  Purchased 13 shares for average price of $4.60.  Sold via stop loss at $5.50 on 6/21.  Repurchased at $5.48 (and added two more shares).  Current price $5.76.  Quarterly dividend is $0.20 per share.
  • Gamestop:  Purchased 1 share accidentally.  Decided to see what happened.  Cost was $17.05.  Current price  $14.63. Quarterly dividend is $0.38. 
  • Sprint:  I earned two shares via Robinhood's referral program.  Average value when awarded was $5.37.  Current value is $5.48.  
  • Macys: One share purchased for $24.00.  Current value $36.82. Quarterly dividend is $0.38.
  • GOV:  9 shares, average cost $12.93.  Current value $16.29.  Quarterly dividend is $0.43.  Stop loss set at $15.00.   
  • USA. 18 shares, average cost $6.35.  Current value $6.53.   Quarterly dividend of $0.17 per share.   
  • GLU Mobile:  Trying for a home run here.  20 shares; average cost $5.15.  Current value $6.38.  Stop loss set at $6.00 but I'm hoping for big things.  
  • Zynga:  2 shares awarded via Robinhood's referral program.   Average value when awarded was $4.36.  Current value $4.13.  
  • Delaware Investments Dividend Fund:  5 shares at $11.71.  Current value:  $11.92. 
  • New Residential Investments:  2 shares at $17.58.  Current value:  $18.04.              

 Robinhood is an online broker that now has both an app and a webpage.  They charge no commission and allow you to place limit or market orders.  They also allow you to initiate bank transfers and then invest the money immediately--you do not have to wait for the transfer to complete.  You do have to buy whole shares.

If you use this link to open an account with them, you and I will both receive a free share of stock. Here is a link to my review of Robinhood.

Stockpile:

This is an online broker for whom I wrote a sponsored post.  I invested $100 in Johnson & Johnson through them.  They charge $0.99 per trade, so even though they sell fractional shares, I don't recommend investing less than $100.00 per trade.  Stockpile had a promotion where they were giving away $5.00 worth of Apple stock so I got mine.  At the end of the year this account was worth $100.46--Johnson and Johnson has not done well.

If you use this link, you get $5.00 worth of stock to begin your account with them, and I get $5.00 too. I wrote a full review of Stockpile a few months ago.

The Bottom Line

As I noted earlier, we haven't gained much in terms of increased account value, but we have managed to live on what we make, put money in our 401ks and even put a little more away.  It has been a pretty good six months, all things considered.

One thing many investors track is dividends.  By this time last year my dividends totalled $3,656.82.  This year they are up to $5,349.75.

How was the first half of 2018 for you?

Disease Called Debt

Friday, June 22, 2018

Do You Need Long Term Care Insurance?

Today, the average cost of a nursing home is $82,125 per year for a semi-private room, according to US News and World Report.   Generally speaking, except in limited circumstances, this cost is not paid by Medicare or standard health insurance, so many people, especially as they approach the retirement years, wonder if they should buy insurance to cover the cost.  The answer, of course, is "it depends".

What is a Nursing Home?

For the purpose of this article, we are going to define a "nursing home" as an institution that provides complete custodial nursing care of the elderly or disabled who are not able to live independently because of mental or physical condition. Medicare does not pay for nursing home care.

This is different than a "skilled nursing facility" that is attempting to improve the person's health and/or functioning so as to allow them to return home.  The facility may be the same but the function is different.  Medicare pays for up to 100 days of skilled nursing care in a year. 

Does a Nursing Home REALLY Cost over $82,000 Per Year?

While the $82,000 figure is an average, different facilities have different costs and the average cost in some states is far more than in others.  If you are in a low cost state you may not need as much, and if in a high cost state you'll need more.

How Much Is Long-Term Care Insurance?

According to the American Association for Long-Term Care Insurance, the average cost of a policy for a single person, age 55, is about $2,000 per year. This policy would pay $150 per day for up to three years.  If purchased at age 55, a couple would pay about $2,500 per year for benefits of $150 per day for three years.  If one member of the couple used all the days, then nothing would be left for the other.  To compare, if the couple waited until they were 60 to purchase that insurance, the premium would be about $3,400 per year. 

Is Long-Term Care Insurance Worth It?

The rule of thumb about ANY insurance is that most people are going to pay more in premiums than they collect in benefits.  If this wasn't the case, insurance companies would not make money and we all know they do.  When you buy insurance, you are paying the insurance company a fee to assume a risk, to turn an unknown into a known.  

I don't know if my husband or I will need nursing home care.  I do know that if we do need it, it will be expensive.  The insurance company knows the odds, ad they are going to look at me and my health history and determine how much time people like me spend, on average, in a nursing home.  They price the policy to make sure that we pay more than that.

The question is whether I need them to turn that unknown risk into a known premium.  Using the figures above, the policy will pay a maximum of $164,000.  If that 55 year old lives to 105, she will pay $100,000 for that insurance.  If she lives to 85, she'll pay $70,000.  Is it worth it?  

A rule of thumb is to buy insurance for things you can't afford to have happen.  I can afford to replace my cell phone so I don't insure it.  I can afford to pay $1,000 toward home repairs so I don't insure the first $1,000 worth of damage from storms.  I can't afford a trip to the hospital so I buy insurance to cover it. 

If all indications are that you will be able to pay $85,000 per year out of your assets, then long-term care may not be worth insuring. The thing to realize, especially with single people (whether never-married or widowed) is that by the time you need a nursing home, your other expenses will be minimal.  Your nursing home bill covers room and board, entertainment, transportation and more.  You won't need your car, you won't shop regularly for clothes or toys, and you won't be going out to restaurants.  Your house can be sold or rented out, and you will still get your Social Security and any pensions.  

The average nursing home stay is 835 days though the stay can be considerably longer for people with dementia and few physical problems.  Interestingly though, the average nursing home resident has a life expectancy of about six months when entering care.   Baby Boomers are estimated to have a one in four chance of spending the end of their life in a nursing home.  Those are the risks.  Can you afford them?

What If You Need a Nursing Home But Can't Afford It?

If you have reached the point that you need custodial care and you cannot afford it--there is no money there, then Medicaid will pick up the bill.  In order for Medicaid to pay your nursing home bill, your assets must be gone, or nearly so.  While some can be set aside for a spouse, your kids' inheritance must be spent before Medicaid pays.  Also, Medicaid looks at transfers from your estate in the last five years when determining eligibility, so if you are planning to give the money to the kids and then to let the government take care of you, make sure you get an early start.  

Maybe Your Kid(s) Should Pay for Long Term Care Insurance for You

If you have adult children and are comfortable discussing your finances with them, give them the figures and let them decide it long term care insurance is worth it, particularly if you are single.  If you do not have a spouse to worry about, then your long term care insurance is insuring an inheritance for your kids (assuming you don't outlive the policy). It isn't going to provide any benefit to you, because Medicaid will pay your nursing home bills if necessary.  Since they are benefiting, they can pay. 

On the other hand, if your kids include one with special needs who will be depending on an inheritance, purchasing long term care insurance could be part of your plan of long-term support.  

What do you think?  Is long term care insurance worth it?  Who should pay for it?  


Disease Called Debt

Friday, June 15, 2018

Guest Post: 7 Cost Effective Ways to Help an Elderly Relative with Their Spring Clean

Today I'd like to welcome Sam from Moving Babies to Racing Towards Retirement.  Even though her expertise is babies and getting babies from place to place, she knows that babies are part of a family and that families look out for each other.  Today she is sharing with us some ways to help the older members of the family with spring cleaning.



Spring is a season most people enjoy. Additionally, it is the time of year most people thoroughly clean their homes, all because it is not too hot and thus you risk a heat stroke or too cold to throw all your windows open. As you busy yourself tidying your home though, it is essential that you do not forget that your mother or grandparent may also need some help cleaning. It goes a long way into making them feel cared for and helps you get a better understanding of their situation.


A clean environment is a key to good health especially since as people age their immunity weakens. You need to ask yourself, are they living in a clean and safe environment? Is there excess clutter that could be hazardous to their mobility?  Therefore, here are some cost effective tips that you can use when helping that elderly relative of yours tidy their home:

#01. Make A List and Prioritize


This one’s for free! When you get a busy spring cleaning, most people scrub down every corner of their house. However, the rooms and items that you use need to always clean. Instead of starting at a random point sit down and prioritize. Prioritizing is also essential because it allows you to allocate different activities enough time depending on their complexity or sensitivity. Additionally, you find when you have everything written down it is harder to forget one section of the house.


#02. Get Rid Of Clutter


Most houses have an accumulation of things that are not used by anyone but are also never thrown out. Unless something has sentimental value, if it is not being used it should be given away, sold, or thrown out. Decluttering creates more space in the house. Additionally, you will find that most of these knick-knacks were only collecting dust. You also need to keep in mind that the house is not yours and therefore do not get rid of anything without the owner’s permission.
Saving tip: If you can get your relative’s buy-in, you could even make some money by selling items that are in good condition but are no longer used.

#03. Come Up With A Work Plan


To adequately cover every inch of the house you need to have a plan. It will also partially involve allocating time to each activity. For example, if your loved one spends much time in their room, then it will need to be cleaned thoroughly than the places they rarely visit, like the attic. Also, when allocating time, you have to avoid having a rigid work plan. This way, you can comfortably accommodate any changes along the way.

#04. Figure Out Their Likes and Dislikes


People like to clean with certain detergents or in a particular order, and when you ignore this order, they may not be entirely satisfied with the results. Therefore, before you go shopping find out if the homeowner has any preferences. Additionally, do not forget to ask whether they are allergic to anything.
Saving tip: Make a list and buy everything at once, there are often coupons for cleaning products and this can bring the price down significantly.

#05. Consider Getting Help 


Unless you are a superhero, you will not manage to clean surfaces, do laundry, dust the carpets and shine the windows in one day.  On the other hand, you cannot spring clean for two weeks. Therefore, you might need to consider hiring some help or calling in some of your relatives. When choosing the people to help you, make sure you select people who can work around an older person to avoid petty conflicts.

#06. Do Not Exclude Your Grandparents in Your Cleaning Project


Older adults might be a bit slow as they work or they may not have the strength needed for heavy lifting. However, this does not mean you should exclude them.  Keeping in mind that this is their house, you need to involve them in every step of your plan, right from the organizing. You can give them a light task like making tea for the team, or sort the cutlery.

#07. Improve Their Air Quality


Spring cleaning not only leave the surfaces clean it also improves the quality of air in the home. However since you cannot do this every month, you can buy your relation a lightweight, inexpensive canister vacuum cleaner, which will make it easier for them to keep on top of the cleaning going forward. Additionally, if they spend much time indoors, get them an air purifier for mold as aging adults tend to be more susceptible to bronchial infections. With the addition of these two gadgets, you will not need to worry about the accumulation of indoor pollutants and allergens.
Saving tip: Do your homework, there are often specials and discounts offered for items such as purifiers and vacuum cleaners so don’t rush out and buy the first one you see.

Spring is a period of renewal, and a restored commitment to making a sheltered space for your older relative so that they can age at home with pride, independence, and happiness.

This is a sponsored post and compensation was received.  
*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, June 8, 2018

Saving Money on a Beach Vacation

It is summer, and for many families, that means it is time to go to the beach.  My husband and I just spent a few days in Ft. Walton Beach Florida so I thought I'd pass along some money-saving tips.

Find Economical Lodging

If the purpose of this vacation is to go to the beach--to play in the sand, read on the beach, sleep in the sun or play in the water, don't waste your money on a fancy hotel room you are only in while sleeping.  Start planning early and explore different types of lodging:
  • Condominium or rental house:  The more people who are joining you, the better deal a condo or rental house will be compared to a hotel.  Most come with full kitchens so you can prepare your own meals--meals that are better for the kids than chicken nuggets and fries and which cost a lot less than full service restaurants.
  • Hotel rooms:  For couples by themselves an inexpensive hotel may be the best deal, especially if it comes with breakfast.
  • Airbnd:  Single travelers can rent rooms in people's homes for a fraction of the cost of a hotel room
With all of these, realize that the closer you are to the beach, the more you will pay.  A good strategy is to locate public beach access, and then find an off-beach hotel within a reasonable drive.  

In Ft. Walton Beach, the beach is on an off-shore island.  We stayed on the mainland less than five minutes from the bridge to the island and less than ten minutes from the public beach park (included showers and restrooms).  Our Comfort Inn was about what you'd expect from a Comfort Inn and it cost us about $170 per night.  Any hotels on the island were over $200 per night and those on the beach were over $300 per night.  Interestingly, on the weekdays we were there, the public beach was less crowded than the private beaches in front of the condos and hotels.  

Keep Food Costs Under Control

If you are staying someplace with a kitchen, use it.  You don't have to spend your vacation cooking elaborate multi-course meals but buy sandwich fixings, snacks, or something you can throw in the oven or crockpot.  

If you are in a hotel, if you have a refrigerator and/or microwave, don't be afraid to use them.  If dining out is an important part of your vacation, include it in the budget, and don't waste your money on fast food--stop at the grocery store and buy a loaf of bread, some deli meat and some fruit.  

Plan Ahead to See Low Cost Attractions

Much as you love the beach, unless you are willing to be burned to a crisp, time there must be limited.  Especially if you have kids, research free/inexpensive attractions in the area so you don't have time to pay $XXXX for the roadside park that has all sorts of fun stuff, at a high price.  You could even check to see if the local library has programs the kids could attend.  If the hotel has an indoor pool they can play there after you get done at the beach.  

While a beach vacation can quickly become very expensive if you let it, with a little planning you can have a good time and not break the bank.  
*Part of Financially Savvy Saturdays on brokeGIRLrich.*

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?  Hmm...beats 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

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



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


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.

Appearance:

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?


Stockpile


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


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


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:

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

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

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

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.  
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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