• A $995,000 Blunder!

    I had a fascinating discussion with someone this week, and I just had to share it with you…

    A guy I know had worked in banking for over 30 years.  He rose to the level of a branch manager, earning a six-figure income.

    The bank offered a retirement plan that employees could contribute to before taxes.  He did not remember the type of account it was, but it was paying around 8% at the time.  The instrument did not require picking a stock or mutual fund.  To this day, he couldn’t tell me what it was.

    The bank went through a transition, and he was let go.  At the time, he had a balance of $20,000 in the retirement plan.  He was asked if he wanted to leave it invested, or take the cash.  He chose to take the cash, and thought that he took all of it.

    20 years pass by, and he starts to receive letters from his previous employer that he has money in his account.

    He ignored these letters, thinking it had to be a mistake.  He thought he’d withdrawn all of that money.

    One day, tired of being harassed by the bank, he decided to pay one of their branches a visit.  It turned out that he had withdrawn all the funds in the account except $100.  And over the past 20 years, that $100 balance had grown to $5000!

    He was shocked, and pretty much kicked himself all the way home.  That was 50 times his money!  If he had not touched a dime of the original investment, he would be sitting on $1,000,000 today!

    Insane, right?

    What he told me is that he didn’t understand investments and how compound interest worked.  Had he known, he said, he would have left the money alone.

    Compound interest is very basic.  I explain it in The Stock Market is For EveryoneFor some reason, people have a hard time wrapping their mind around the concept.

    Albert Einstein called compound interest the most powerful force in the universe.  This is true – but you’ll only be able to make it work for you if you understand it!

  • Is Clorox A Buy?

    buy clorox stock

    I wrote this post for new investors that may be risk-averse.

    If you’re like me, you have a high tolerance for risk.  You will have a portfolio that consists of companies on the cusp of innovative disruption.  These companies’ stock prices tends to be quite volatile.  You could be up 200%, and then give back more than half in weeks.

    That kind of price movement may not sit well with some investors.  If you fall in this category that’s fine, because I have a suggestion for you: Clorox!

    Now, I am a believer that many old-line companies are in big trouble.  They’re simply not moving fast enough to remain competitive.  However, Clorox (NYSE: CLX) is unique.  I believe they will continue to outperform the market for many years to come.

    Clorox makes products that we must have on a daily or weekly basis, and that’s simply not going away.  Consider the brands they own:

    1. Clorox Wipes

    2. Clorox Bleach

    3. Hidden Valley Salad Dressing

    4. Pine-Sol

    5. Burt’s Bees

    6. Glad

    7. Brita Water Filters

    8. Kingsford Charcoal

    9. Fresh Step Cat Litter

    10. Liquid-Plumr

    I think you could sleep at night if you owned these brand names.  You’re not going to set the world on fire in the way you would if you owned an Amazon or a Netflix, but that might not be your style.

    That’s why I believe Clorox is a good choice for risk-averse investors.

    Disclaimer/Disclosure Statement: Information in this article is not intended to be a recommendation to invest in any stock.  Rather, it is presented for readers’ education and consideration when making their own investment decisions.  The author has no position in any of the companies mentioned.

  • Make 5-6% In 6 Months Guaranteed!

    Those of you who have read The Stock Market is For Everyone, and/or regularly follow this blog, might be wondering right about now, “Has Eric been hacked?!” after seeing the title of this post.  Not to worry!  It’s still me.  Read on…

    On November 2, 2018, Illumina (NASDAQ: ILMN), the gene-sequencing giant, announced that it would be acquiring its much smaller competitor, Pacific Biosciences of California (NASDAQ: PACB) for $1.2 billion in cash, or $8 a share.  The deal is expected to close in mid-2019.

    Currently, PACB is at $7.52, which is 6% below the deal price.  The reason it’s trading below the deal price is that the acquisition is not expected to close for at least five to six months.

    The likelihood that this deal would fall apart is slim to none.

    Therefore, if you have money sitting around that you can tie up for six months, this opportunity guarantees that you’ll get a return somewhere between 5 and 6% depending on where you buy it.

    In my opinion it’s worth it, if you have the money and the time to wait.

    Disclaimer/Disclosure Statement: Information in this article is not intended to be a recommendation to invest in any stock.  Rather, it is presented for readers’ education and consideration when making their own investment decisions.  The author has no position in either of the two companies mentioned.

  • Weed Stocks: Yes? No? Maybe So?

    pot stocks

    A very good friend of mine asked me this week if she should invest in a cannabis company.

    My answer was “I don’t know.”  Because I have no idea who the winner, or winners, will be.

    Here’s an interesting piece of information…

    As you may know, 2018 has been a monumental year for the legalization of marijuana.  Canada made it legal to use marijuana for recreation, as did the state of Vermont.  Beer, wine and spirits company Constellation Brands (NYSE: STZ) invested in cannabis company Canopy Growth (NYSE: CGC), and tobacco company Altria (NYSE: MO) announced on Friday that it was investing $2.4 billion in Cronos Group (NASDAQ: CRON), another pot company.  Yet the marijuana exchange traded fund (ETF) Alternative Harvest (MJ) is down 36% from its all time high.

    Why is that?

    Well, for starters, most if not all of these cannabis companies are losing money.  Even the well capitalized ones.  I know that their goal is to focus on growth and sacrifice profits in the short run, but I still don’t know who will end up winning.

    I myself have not started a position in any cannabis company as of yet.

    I will post more on this sector as time goes on, so keep tuning in!

     

     

     

  • Stocking Stuffer Stocks For Your Children

    Here are 10 great ideas for stocks to gift your kids this year!  For older children (10 and up), you might want to add a copy of The Stock Market is For Everyone to their Christmas stocking to get them started with a mind toward financial freedom early!  Enjoy the video.

  • How Does The Fed Raise Interest Rates?

    If you’ve been watching financial media lately, there has been plenty of discussion regarding the Federal Reserve raising interest rates.

    So…how exactly does the Fed do that, and what effect can it have on the stock market?

    For starters: the Fed doesn’t actually increase the interest rates directly.

    The Fed has something called a discount window.  The discount window is where banks, such as Chase and Bank of America, go to borrow money in order to maintain their reserve requirements.  The reserve requirement is the amount of funds a bank must have on hand at all times.

    So what happens is that the Fed will increase the discount rate they charge banks.  The banks then take the increase and pass it on to us, the consumers, by raising their rates.  That, in essence, is how the Federal Reserve increases interest rates.

    A rate increase can cause sell-off in the stock market as investors, attracted by higher rates on bonds, certificates of deposit (CDs) and savings accounts, move their money into these “safer” places to avoid risk.

    As I stated in yesterday’s post and in my book, events like this don’t matter when you’re investing for the long-term.  Hold, hold, hold.

     

  • Why Was The Market Down Today?

    Unless you’re a professional money manager, you don’t watch every minute of the stock market.  Most of us have full time careers, lives, etc. that keep us busy.

    However, if you happened to check your brokerage account today, you might be wondering: “What the hell happened today?!?!?!”

    What seems to have happened, for one, is the market is not so confident in this so-called trade truce between the US and China.  It breeds uncertainty.  The markets hate uncertainty.

    There is also talk of the Federal Reserve raising interest rates.  I am going to discuss this in greater detail tomorrow.

    What is important to remember is this: when you’re a buy and hold investor, headline items like this don’t mean that much to you.  Just keep holding on to what you have, and take advantage of times like these to add to your positions in good companies at a discounted rate!

     

  • Give the Gift of Knowledge

    Screen Shot 2018-12-03 at 9.03.27 PM

    Almost anyone could benefit from receiving a copy of The Stock Market is For Everyone as a gift, because we all should have financial freedom as we advance through life.

    At 24 pages, it’s a quick, easy read – and it gives you the basic information you need to know to get started right then and there.  No jargon, no unnecessary terminology.  Start with as little as $25.00, develop an investing habit that sticks for life, and watch your wealth grow.

    Who will you share the gift of knowledge with this Christmas?

  • Will We Have A Bear Market In 2019?

    bear market 2019

    Photo: Eve Livesey.  

    Good morning.

    “Are we in a bear market?”

    “What should I do if we’re in a bear market?”

    As the end of the year approaches, you will start to see many financial newsletters calling for a bear market in 2019…especially considering the way the second half of this year has gone.

    Throw in the potential Fed rate hikes, as well as the trade spat with China (reportedly resolved as of yesterday, but who knows?), and you have a recipe for a recession – which could lead to a bear market.

    The truth of the matter is that no one knows for sure as to what next year will bring.  I wouldn’t be surprised to see the market continue to move higher, and a bear market wouldn’t shock me either.

    The last bear market we had was between 2008 and 2009.  It lasted for 15 months.  Since the 1930s, the U.S. stock market has had eight bear markets, lasting 1.4 years on average.

    So what should you do if there’s a bear market?

    It depends.  If you need your money in the next three years, you should probably take it out of the market.  If this year has taught you anything, it’s that you never know when a market sell-off is going to happen.

    If your time frame is more long-term, which I hope is the case, then do nothing.  If you are a regular investor, and you have a fixed amount that you invest each month, then continue to do so.  If we have a bear market, you will have bought stocks at some very good prices.  Do not listen to the pundits that tell people to jump in and out of the market because they believe a bear market is coming.  I said it before and I’ll say it again: it is impossible to successfully time the market.

    We here at Wealthy Joe are long-term investors.  We don’t let a sell-off or bear market scare us out of owning great businesses for the long term.

     

  • Wealthy Joe Weekender – December 2, 2018

    The Stock Market is For Everyone is available on Amazon in paperback format for $9.99 and as an ebook for $3.99.