Birthday Bonanza: Part 1

This week, I will be running a series of posts titled “Birthday Bonanza”.  In this series, I will discuss how investing $1000 for your child at the time of his/her birth, or soon thereafter, can result in considerable returns by the time your child turns 18!

Enjoy…and please share your comments!  Whether you have a question, or have actually done this, I would love to get a discussion going about investing in the stock market and how it can benefit our future generations!

Dollar birthday cake

I got the idea to write this series one evening while listening to one of my favorite podcasts on investing.  One of the listeners had written in asking how they should invest money for their three-year-old son.

The host of the show was taken aback that this father had the wherewithal to even consider investing for his son at such a young age!  Most parents are not thinking that way when their child is three.  I know I wasn’t.

Last year, as many of you know, I wrote a short beginners’ guide titled The Stock Market is For Everyone.  In it, I stress the importance of taking responsibility for your financial freedom through smart investing.

Having heard this podcast, I became inspired to write this “Birthday Bonanza” series for the blog.  My aim here is to encourage – hell, to implore – parents to start investing for their children as soon after they are born as possible.

Nearly 18 years ago, my daughter, Mia, entered the world.  It was, of course, one of the happiest days of my life!  I’m thankful that I have always been in a position to provide for her financially.  It never dawned on me at that time, though, to open an investment account on her behalf.  Had I done so, the amount of wealth I could have generated in her first 18 years of life could have been substantial.

Two years ago, I opened a custodial account for her and purchased six shares of Facebook (NASDAQ:FB).  Better late than never!

After listening to that podcast, I went back to the year my daughter was born – 2000 – and
looked at potential companies I could have invested in back then.  Had I purchased $1000 worth of Amazon (NASDAQ: AMZN) stock, for instance, how much would that investment be worth today?

Quite a lot, in fact!  My $1000 investment in early 2001 would have grown to $116,000 in 2018.

Imagine what your life would have been like had you started out at age 18 with $116,000.  As a result of an initial investment of $1,000 – which was well within my budget at that time – I could have made this possible for my child.

So…how about you?

Like every parent, you want to take steps to ensure that your child has a head start
in life.  I have good news – you can do this!

The future results of an investment you make today could put your child in a different socioeconomic bracket.  The higher a child’s socioeconomic bracket, the greater his or her chances of success.  This is not my opinion…this is a fact.

Regardless of your own socioeconomic standing, you still have the power to change that of your child – with just $1000!

Keep reading this week to learn more.

 

What Does Going Long And Short A Stock Mean?

What does “going long a stock” mean?

Going long a stock is Wall Street vernacular for buying and holding a stock.

You might hear the term a lot if you watch CNBC or read financial media.  And I discuss it at length (pardon the pun) in my book, The Stock Market is For Everyone.

What does it mean to short a stock?

When an investor believes that the value of a stock is too high, the investor can place a bet that the stock price will fall, and make a profit if s/he is right.  This is done by shorting the stock.

When you short a stock, you are selling shares you don’t own with the hope of buying them back more cheaply.

When you sell a stock short, your brokerage firm has to borrow the shares in order for you to cover your short.  And in order for this to occur, you will need to use margin, which as I wrote recently, I strongly discourage.

So, this is how you short a stock.  (Many people have a hard time with the concept of being able to sell something they don’t own.)

Until next time!

 

Buy And Hold Works!

This evening I was watching Mad Money with Jim Cramer.   He was going over a list of investment disciplines investors should live by.

During the program, he talked about buying and holding and how it doesn’t work.  I think this is terrible advice!

History shows us that the monster gains are made over holding for decades.  If you’d followed the philosophy that buying and holding doesn’t work, you would never have participated in the life changing investments.

So let’s play a game: what if you sold after a stock tripled?  How much money would you leave on the table if you invested $5000 starting in January 2003 and sold for a $15,000 profit?

Apple (NASDAQ: AAPL): $1,053,000

Booking.com (NASDAQ: BKNG): $521,312

Netflix (NASDAQ: NFLX): $2,318,333

There are many other examples – but you get the point.

If you own a company, and that company is winning, hold it and add to it.

Buying and holding is the only way to build wealth over time.

3 Traits Of The Wealthy!

I have read many books and articles on wealthy people.

I’m interested in how they built their wealth – and, more importantly, how I can apply it to my own life.

As it turns out, adopting a “get wealthy” mindset is something you don’t have to be born with.

Take this statistic: only 1/3 of your wealth is a factor of your income.  The other 2/3 is a product of money management.

Hence, there are no shortage of seven-figure households with a negative net worth.

Without further ado, here are three key traits commonly found in wealthy individuals:

1. Wealthy people have the ability to remain unusually calm while those around them panic.  I’m not saying they don’t feel emotion, because they do.  It tends to run counter to what most people experience, however.

For example, a severe market selloff might spook most investors, but people who possess this trait look at the selloff as a buying opportunity.  They become greedy when others are fearful, and fearful when others become greedy.

2. They live below their means.  Contrary to what the media wants you to think, the majority of people in America who are wealthy live very normal lives.  That’s how they got rich, and it’s also how they stay rich.

They don’t suffer a great deal from income creep.  Income creep is when your spending increases as your income increases.

A great example is Warren Buffett.  The man is worth close to $90 billion and still lives in the house he bought for $31,500 in 1958, which is about $250,000 in today’s dollars.

The key is to save and invest the majority of your additional income over time. That’s how you build wealth.

3. They don’t care what other people think of them.  Depending on your age you may be familiar with the term “keeping up with the Joneses”.  Meaning that if your neighbor buys a new car, you feel as though you need to as well.  The wealthy don’t care about keeping up with the Joneses.

The wealthy will live in the same house and drive the same car until they run it into the ground.  They understand that debt is the enemy of wealth, so they avoid it like the plague.  Although it may not look like it, these people are sitting on a net worth of $10,000,000.

This is how you build wealth.

Until next time, my wealthy Joes and Janes!

Space: The Next Investment Frontier!

space

On Monday, Elon Musk revealed that Japanese billionaire Yusaku Maezawa will become the first private tourist to fly around the moon on SpaceX’s big Falcon rocket.

The amount paid was not disclosed, but Maezawa wants to take six to eight artists from around the world on a week-long trip.  The trip is scheduled to take place in 2023.

This story is amazing to me!  To think that commercial outer space travel will take place in my lifetime!

Initially, it will only be for the ultra rich.  But eventually, over time, it will become less expensive and more accessible.

I don’t know how big the addressable market for space travel is, but it will be interesting to see how things develop.

In the meantime, I will keep you posted on any new opportunities.

Until next time!

This Tech Boom Will Make You Millions!

In the late 1800’s, we saw the emergence of three huge technology platforms simultaneously.  They were the the telephone, electricity, and the combustible engine.

These three, together, were the catalyst that ignited economic growth unprecedented at the time – thus creating billions, upon billions, of dollars in wealth.

Today, we are embarking on a technology boom that may dwarf the previous booms.  For the first time in history, we have at least seven technology platforms evolving at the same time.

They are:

1. Artificial intelligence (AI)

2. Blockchain technology

3. 3-D printing

4. DNA sequencing

5. Mobility as a service

6. Financial technology (fintech)

7. Cryptocurrencies

I didn’t even mention the cloud, ecommerce, streaming video, and gaming (which is in its infancy, but will become ginormous!)

Oh, and I almost forgot to mention China…and, down the road, India.

We are going to see a tech boom unlike anything we’ve ever seen!

If you haven’t already done so, I suggest you start researching great companies to invest in.  Check the previous posts I linked to above for some ideas!