Tag Archives: retirement.

Warning: The Annual Summer US Stock Markets Selloff Is Coming!

US Stock Markets Update:

Summer sell off is coming
Question #1
What has changed about the US and world economy two months ago?

Answer: Almost Nothing

Question #2
Did anything change in China?
Answer: No

Question #3:
Is the price for a barrel of oil still a lot lower than a year ago?
Answer: Yes

Question #4
Is Greece still in a financial mess?
Answer: Yes

Question #5

Is the US Federal Reserve Board (FED still going to raise interest rates?

Answer: A resounding YES!
So; you may ask, why did the US stock markets bounce back up so quickly?
For example, the Dow is back up to 17,808 from a low of 15,370 (A nice 15% gain in just two months.) after the very wild ride in the first two months of 2106?

Warning, Don’t Get Too Happy!!

I have some excellent news for you; we are going back down!!! I think with the usual annual summer sell-off; I am over 99.99% sure this summer will be a very bumpy one. ….Yes, when the US a stock market is going down/correcting it is not bad news for intelligent investors.

It is very hard to find any fundamental reasons that the US stock markets will continue to go higher from here. However, the market mostly operates in the short-term on emotion, such as fear and greed, so that I may be surprised.

Remember, you have been warned, hang on, we are in for a rough ride in the upcoming months.

Schedule K-1s! (IRS Form 1065):
Don’t you just love them, I do? I get a lot of questions on Schedule K-1s!

My very beautiful, and most of the time kind, and sweet bride, Dinara always tells me” if you love me, you should not mind repeating things over a thousand times.”
So, as I have said every year now for over ten years; if you get K-1s each year, and they are in an IRA, they are not taxable.

You can always log on to TurboTax and try to enter them in, and as soon as you get to Part II under I2, TurboTax will ask you if this box is checked and if you say yes, it will stop you!
Please feel free to try it.
Once it stops you, you just have to keep these K-1s with your 2015 taxes.

And, if the IRS ever send you a letter saying you owe us taxes on this, you just fax them your IRA statements, 100% of the times that is all it takes, and they will go away as they have done for every single other person I have helped over the years who the IRS have contacted via mail.

When to Sell Stock(s)

87BE9AB8-1CF1-483D-AFE0-D515C9D12E0D

Over the years, as soon as people meet me or learn that I am a long time experienced investor, they start bragging about a stock that they have that as done very well because it has increased in value (Very few talk about the many that they have lost money on).

And I always ask, “So, did you sell enough shares to at least prevent you from losing your original investment when the stock goes back down?”

Always with a puzzled look on their faces, they reply, “You mean take some profit?” No, I reply, you always want to leave your profit in the market. What you want to protect is your principal, your hard-earned money, your original investment. By taking out you original investments, you can sit back and not have to worry about the wild emotionally driven up-and-down swings in the stock markets. Even better, if the stock you own pays at least a quarterly dividend, your profit can be keep growing over time collecting reinvest dividends.

And with that explanation you can see the imaginary light bulbs go on over their head, “Oh, I get it, then all that is at risk is my gain, not my initial money!”

However, most people always find it hard to sell a stock that is doing very well (and sometimes even one that is clearly is a loser that will never recover). Sunk-cost fallacy.

I will share a true story here. I remember meeting this guy who asked me for free advice on a stock he had bought, he paid $30,000 for 2,000 shares of this stock that cost him $15 per shares. When I met him, the stock had gone up to $25 per share, so it was now worth $50,00. I said. “If I were you I would take out $31,000 and leave $19,000 in the market, so no matter what happens, you can never lose your $30,000 in this stock.”

He looked at me as if I was telling to give up his first born, and that I was crazy because this stock, his stock only has one direction–UP!

Anyway, and about six months later he called me on the phone and said he wish he had listened to me because the stock was now down to 36% and he now only had $32,000.

He came back to visit me unannounced because the stock had now dropped down to less than $1.80. But, as it keeps dropping, he kept buying to where he had over 30,000 more shares for a total of 32,000 shares at a total cost of over $80,000–he had used credit cards and equity in his home, and he was really upset with himself because this has caused a lot of stress with his wife..

After he had left, I did some in-depth research on the stock. It was a medical stock, that was going through FDA rejection after rejection, but I did notice it was not due to the product, but the sloppy medical trials. I called him back and explained this to him; he was still not happy has his home life was not the best.

About two years later I noticed that stock price had gone back up to over $9.80, and I called him, and I said your value is now over $300,000. I told him to sell at least half and pay off the credit cards and his home equity loan, he said no he would not because they were one more step away from possible getting approval by the FDA and the stock would go up even more. And he was right; the stock went to $38 per shares, and when he call me I said you were right you are now a millionaire with over $1.2 Million.

He asked me what to do and, again, I said to sell at least 25% and diversify your portfolio by putting some in mutual funds. He said he would and schedule and appoint to meet with me, but a week later but he kept rescheduling it until he just did not show up.

Then the dot com bubble burst and even though it was not a technology stock, the tech bubble crash was so bad that it took down all types, over 90% of companies saw their share price plunge by over 50%.

I called him a few times as the market kept going up then down and with wild swings, but he always found and excuse. The last time we spoke he still had over $400,000, but he told he is going to wait until the market recovered.

And then 9/11 came along, and the market continued to fall and so did most stocks and no one was having a good time, especially for people in the stock market business. I gave up on him, and about two years later he called me and I told my assistant just to take a left a message because I was in a meeting.

Later that day I look at the stock, and I was shocked to see that it was down to $.25 per shares because even though the product work it was more of discretionary medical devices and due to the back economy people just did not buy it and sales were poor.

I called him back to see if he had sold any and he said no, he was now going through a divorced and his life was in shambles because he add borrow more money and bought more shares at $.25 he now own 92,000 shares and the price of the stock was now $0.07 total value $6,440.00!

I have never heard from him then, and the stock price has never recovered; there are reasons for this story.

*ALL investments have risk, especially equity investments such as shares of company stock
*At some point, you must sell shares of stock you bought

When to Sell Stock:

First of all buy only stock that pays at least quarterly dividends: (with one exception Amazon.com: More on this please read “Why I Changed My Mind on Amazon”)

Here are My 5 Rules to When to Sell Stock

1) SELL, whenever you have a stock that the price has gained more than 20% in less than year: Sell enough shares so you can take out your original money invested plus 10% of your gain. For example, say you invest $20,000, and it gained 20%–now you have $24,000, so you would sell enough shares to take out $20,000, plus $400 so now you have $3,600 left in the market.

Do you see the beauty of this investment strategy? Your original investment of $20,000 is no longer at the risk of the market, plus you pocket $400 for a bit of fun money. You can now relax knowing that no matter what happens in the market going forward, you can never lose any of your original money, but you still have money in the market collecting dividends that are being reinvested to buy more shares in a down or an upmarket.

2) SELL, If a company reduced their dividends payout amount before your investment shows a gain of 20% or more. When a company reduces, suspends, stops or cuts their cash dividends, something is not working, and you should be alarmed! Always, remember this; a company that is paying a minimum of a quarterly dividends is usually a profitable company, and when management and the board of directors cut or reduce dividends payout, you should also reduce your holdings.

This is 100% certain, when a publicly traded company cuts or reduces their dividends, the stock price will immediately dive down, be patient wait for a few days and sell a minimum of 70% of your total shares, even if it does not bounce back. If they cut the dividends payout 100%, do the same but sell 90%. I believe that if you do your research right, you should never sell 100% of you stock unless something really bad happens to the company, where you know it is a matter of time before they file for bankruptcy.

3) SELL whenever everyone one is really happy. If all your friends, family members, coworkers and general media is saying how well they are doing in the stock market that’s when to sell stock. Look at the stocks that are in your portfolio that have doubled within a year and sell 30% of those shares.

4) SELL if you will need the money in less than five years and keep the money in cash until you need to spend it. (Read more about this in “Your Buckets of Money”)

5) And my last rule on when to Sell Stock: SELL to keep your portfolio in balance so that all times you have only 70% in stocks and 30% in cash. If you do this, a remarkable thing happens; your will take the costly emotion out of investment, because when the market is doing very well, you will be forced to sell shares to put more in cash, and when the markets are correcting/crashing, you will be forced to buy more shares which mean you will be selling when the stock markets are going up and buying when the stock markets are going down.

Very Important NOTE on Selling: Never sell 100%–try to keep at least one to five percent: Here is one of the founder of Apple sold off 100% of his shares of stock for only $800 and bought gold to be safe, he now admitted in 2015 that his gold is worth only $1,750 but if he had kept his shares of Apple it would be worth over one billion USD (Read more Here)

Thanks for your time and attention and remember to learn more by getting a copy of one of my powerful personal finance books that are sold everywhere e–books or paperbacks books are sold.

Or you can just simply click this link

You Can Never Save Money by Spending Money!

Money Lesson Number #129: You Can never save money by spending money!

Don’t let the Geico ad with that cute little talking and dancing  gecko lizard fool you–the only truth about that commercial is that every fifteen minutes, you and millions of people are just adding more money to Warren Buffet’s already $70-plus billion; he owns the Geico Insurance Company.

The-Geico-Gecko1

Always remember this: if you are spending any money, you are not saving, no matter how good the deal is, even if it is on sale for 99.99% sale off.

You did not save money if you bought it, you spent money (more often than not wasting money on junk that you will not need in a month), your money is going from your pocket to someone else’s pocket and, usually it is a billionaire or a multi-billion dollar company.

The only time you save money is when your hard-earned money stays in your pocket, whether it just sits at your home, in your checking account or in a portfolio that you own.

Learn the little tricks that corporations use to get your money.  Every time you see any kind of ad, such as TV commercials, printed ads, a sponsor page on your Smartphone via Facebook or Google, they have one goal in mind; to take your money from you forever!

The old saying is true: “A fool and his money are soon parted,” or even worse, “A fool and his money are soon partying.” But there is even a much better saying: “A Penny Saved is a Penny Earned.”

My favorite stratagem is to pay yourself first. Each time money comes into your hand, save/invest twenty percent (20%) and spend the other eighty percent (80%).

I know at times you must buy goods and services, but what you should know is that each time you spend money, it is going to make a large multinational corporation or someone wealthier and you poorer

(Please see one of my earlier  blog: Get Rich off the Very Companies You Pay Each Month for Goods and Services [Gas, Electricity, and Water Companies]). 

Most people have been duped into spending money. All ads no matter how simple or sophisticated are designed to wire your brain to make you give up your money to someone else. It is not easy, but you have to rewire your brain to know when you are getting duped.

A good way to start is with your children by letting them know that most TV and other commercial advertising are not 100% true. Our seven-year-old now always asks us each time he sees a TV ad, “Is it true?” and rarely are any of them true!

But, you can also always ask yourself by saying, “Can I go one day without it?” and the next day, ask the same question and most of the time, you will keep you hard earn money. The products or services are often things that you can live comfortably without.

Here is a quote from one of the first book ever written about money that will never change, The Richest  Man in Babylon“; Ten percent of what you earn is yours to keep.” 

buffet20My hope is that one day, people will realize that they have been tricked emotionally always to turn over their money to billionaire or people who already have more money than they do. 

“Too many people spend money they earned..to buy things they don’t want..to impress people that they don’t like”. –Will Rogers

Thank you for reading, please share my blogs and books with someone you love.

Love Always

www.sherwinpbrown.com

Two Financial Headlines That Will Shock You

Here are two money news headlines that will have you shaking your head

Breaking News

1) Per CNN Money.com: Only 48% of Americans have invested in the Stock Markets, this includes 401(k) money. That means 52% are missing out on the over 200% return in the past six years. There will be a lot of broke retired people in the future.

2) Per NPR.org:  So much money is going into Swiss Banks that the Swiss government is paying a negative rate of return, in other words, people are paying the Swiss Government to hold their own money … that is stupid.

Here is the great news; sooner than later, they have to come back in the stock market, and this will push the markets higher. I will make a prediction that within less than 18 months, the DOW (the 30 industrial stocks) will move from 18,000 to over 20,000!

In addition, these people are who work for a company that matches their employees’ contributions are actually saying to their employer, “That extra money that you are paying me so I do not have to work for forever and will have better much better financial life when I retire? Keep you money I do not want it, I want to be a worker bee for the rest of my life.”

Per CNBC .com:  Seventy-three percent of employers who have a 401(k) Plans for their employees match their employees contributions. Companies such as Wal-Mart Google, Medtronic, Starbucks will match 100% of your first 4-6% contribution.

So simple math: if you are earning $50,000 and you contribute 10% each year ($5,000), then your employer will contribute a matching amount the first 6% that is $3,000. So now you have a total of $8,000 starting to work for you each year.

But, say you work there 20 years and do not contribute a dime, then you gave up over $60,000! And if that $3,000 only compounded at 7% per year with dividends plus growth, you are missing out on $122,986, not to mention the tens of thousands of dollar of taxes savings that will be working for you if you are an intelligent investor.

And keep you money in a traditional 401(k) Plan and not a Roth.

4fatcat 001

Please do note: Each company has different vesting periods on the money they match, for example the first year is 20% vested, second year is 60% vested then, after three years you are 100% vested. However, there are no vesting periods on the money you contributed for yourself–you are 100% immediately vested, and you can rollover/take this money with you any time you leave the company. In addition, the IRS and sometimes your employer set the limits each year on how much you can contribute each year.

 As of 2015, the limited by the IRS is $18,000 if you are under age 50, but if you are 50 or older (up to age 71-and-a-half), you can do an additional $6,000 for a total of $24,000 per year.

You can read more about investing in one of my very easy to read investment books that are sold everywhere in paperbacks and eBooks such as on Amazon .com, Google play. iTunes Kobo book and Barnes and Noble,  just to name a few

 www.sherwinpbrown.com

Last Minute Tax Tip To Get A Bigger Refund!

Here is a quick and very easy way to get a bigger refund (or owe fewer taxes) while saving for your retirement at the same time!

1) Contribute $5,500 ($6,500 if you are 50 or older) to a traditional IRA … do not do a ROTH

2) Invest the money in FIVE different dividend paying companies for at least the next TWENTY years

Make sure these companies are companies that you and millions of other people must use their products and services every day. Here are some great examples of stocks & companies I’m talking about:

  • Your utilities company (Gas and Electric) you pay every month
  • a freight train companies such as CSX
  • Visa or Master if you use those cards daily or weekly
  • Food companies such as Sysco Corp.
  • The very company you pay for mobile phone service every month such as AT&T or Verizon
  • And last but not least, the gas company where you fill up your car bi-weekly, such as Chevron, Exxon Mobile, Marathon Oil, etc. (please read this very short blog)

Stop Paying your Electric Bill

3) Make sure that your quarterly (or monthly) dividends are enrolled in a Dividend Reinvestment Plan, also known as a DRIP.

4) Do not invest your money in Mutual Funds–over the long run, you will just get an average return and will not do as well as the top 5% of intelligent investors.

5) Here is how you will benefit; you pay fewer taxes now, and you should have a lot more money in 20 years from now because the taxes you did not pay are working for you!

6 You can thank me by downloading a copy of my book far as low as $4.99 at www.sherwinpbrown.com

7) *** Please READ DISCLAIMER ON MY WEBSITE AT www.sherwinpbrown.com

Stop Paying Your Electric Bill

How to get your current gas and electric company to eventually pay you more than you’re paying them each month.

 

nexteraenergya23Did you know if you live in Florida and you pay your utility company, such as FLP {real name is Nexta Energy—(NEE)}, at the average monthly cost of $183 for 32 years, it will cost you a total of $70,272 ?

 

But, if you had just invested only two years of the same payment $4,392 ($183 x 12 x 2 = $,4,392), it would now be worth $251,376 as today. At a dividend yield of 3% per year, you would now be earning  $ 7,541 per year–that is $628 per month. You would now be getting $445 per month more than the $183 you are paying them.

Here is a second example: If you live in Chicago, and you pay COM Ed (ED). Culling data from Yahoo Finance for the past 45 years, and using the current average $135-per-month x 45 years, your total bills paid would amount to $72,900.

mYXT0ThmBut, if you had just invested only two years of the current annual cost $3,240 ($135 x 12 x 2 =$3,240), your investment with growth and enrolled in a Dividend Reinvestment Program (DRIP), it would now be worth $579, 292 and  with a current dividend yield a 4.2 percent.

Your current yearly investment income from them would be $24,330 or $2,027 per month. That is; you are now getting $1,892 more than you are paying them.

How much do you pay your utility company and how long have you been paying them?

What other company do you buy something from each day?

Are you a Starbucks junkie? Do you pay about $2.50 per cup twice per day? Plus tip?

starbucks_1798272c That is at least $1,825 per year, or in 23 years you will have spent $41,975. But, that is okay if you just had put one year of your coffee cost of $1,825 twenty-three years ago and let it compound via growth and dividend

The value of that $1,825 as of today would be worth be $282,521 with a cash dividend yield of 1.3%, and  it would be paying you $3,672 per year or $10.06 per day. You could still enjoy your two cups per day and have $5.06 more than you are paying them.

Money Lesson #140: As it says in my book “Simpler, Safer Investing”, invest where millions of people such as yourself buy and use the companies’ products and services each day, such as your electric and gas company, or your favorite coffee chain.

To lean more on this subject, please check  my book on my web site www.sherwinpbrown.com  or an Apple ITunes,  Amazon .com,  Google play, Barnes and Noble, Kobo Book are anywhere books are sold.