Essential Investing Considerations and Strategies
Discover key considerations for investing wisely, including legal limits for contributions, the benefits of dollar-cost averaging, the stability of mutual funds, the potential of dividends, the costs of financial advisors, and tips for finding the most cost-effective mutual funds for your portfolio.
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Presentation Transcript
Money Matters Topic 13 MORE INVESTING CONSIDERATIONS
Legal Limits ALWAYS REVIEW LEGAL LIMITS FOR IRA, ROTH IRA, 401K, AND/OR 403B CONTRIBUTIONS. THESE DO CHANGE, SOMETIMES ANNUALLY. GOOGLE SEARCH LIMITS NOW.
Dollar Cost Averaging TIMING THE MARKET IS VERY DIFFICULT. WILLIAM BERNSTEIN IN HIS BOOK THE FOUR PILLARS OF INVESTING, LIKENS TIMING THE MARKET ON A DAILY BASIS TO HITTING A DART BOARD BULLSEYE WHILE BLINDFOLDED. DOLLAR COST AVERAGING MEANS INVESTING A SET AMOUNT EACH PAYCHECK OR EACH MONTH. THIS ALLOWS YOU TO BUY SOME PRODUCTS AT ALL PARTS OF MARKET PRICING. THIS AVOIDS THE PITFALLS OF MARKET TIMING. RETURNS ARE OFTEN BETTER WITH DOLLAR COST AVERAGING COMPARED TO TRYING TO TIME MARKET.
More Investing Considerations -MUTUAL FUNDS LESS VOLATILE THAN INDIVIDUAL STOCKS -NO MATTER HOW YOU ALLOCATE YOUR FUNDS, THERE WILL BE SOME PARTS THAT PERFORM BETTER THAN OTHERS. YOU LL LOOK BACK AND SAY I SHOULD VE DONE THIS AND AVOIDED THAT. THERE IS NO WAY TO AVOID THIS. -AS DAVE RAMSEY SAYS, INVESTING IS LIKE RIDING A ROLLER COASTER. IF MAKES NO SENSE TO JUMP OFF WHEN IT IS MOVING.
Dividends SOME COMPANIES OFFER PAYMENT TO INVESTORS FOR STRONG EARNINGS. FOR EXAMPLE, FORD MOTOR COMPANY PAID A QUARTERLY DIVIDEND OF $.15 PER SHARE IN APRIL 2023. WHY? THEIR SALES WERE GOOD, SO THEY SHARED PROFIT WITH SHAREHOLDERS. SO, THE INVESTOR RECEIVED SOME MONEY FROM THE DIVIDEND. IF YOU HAVE A MUTUAL FUND THAT RECEIVES DIVIDENDS AND REINVESTS THEM WHEN DISPERSED, YOU AUTOMATICALLY GAIN A SMALL FORM OF DOLLAR COST AVERAGING. USUALLY QUARTERLY, BUT CAN BE ANNUAL, OR ANOTHER TIME PERIOD.
Advisor Costs SHOULD YOU PAY A FINANCIAL ADVISOR? SHOULD YOU INVEST IN ACTIVELY MANAGED FUNDS? ARE THEY WORTH IT? THAT IS AN OPINION. YOU HAVE TO DECIDE FOR YOURSELF. IF YOUR EMPLOYER LIMITS YOU TO A MORE EXPENSIVE COMPANY, YOU ARE LIKELY STILL BETTER OFF INVESTING WITH THEM VS NOT INVESTING AT ALL.
Finding Cheapest Mutual Funds RESEARCH THEM. GOOD STARTING PLACES ARE REVIEWING COMPANIES LIKE VANGUARD, FIDELITY, SCHWAB, OR DIMENSIONAL ADVISORS. EVEN THEY VARY IN FEES (DOMESTIC FUNDS CHEAPER THAN INTERNATIONAL.) PLUS, YOUR EMPLOYER MAY NOT OFFER THEM. SO, WHAT DO YOU DO? RESEARCH AVAILABLE FUNDS AND COSTS. GET FUND TICKER SYMBOLS, AND LOOK AT THEM. GO TO GOOGLE AND RESEARCH SOME EXPENSE RATIOS NOW. CHECK SOME DOMESTIC AND FOREIGN FUNDS FOR COMPARISON. ALSO, CHECK NEWSPAPER INVESTMENT SECTION FOR MUTUAL FUNDS.
