This is from one of my recent weekly "Smart Money Monday" Segments on Waco/Temple/Killeen NBC affiliate KCEN 6.
1. What is a stock?
Stocks – also known as equities – are securities that represent ownership in a corporation. And if you’re a “shareholder” of a business, you have a claim to part of the company’s earnings and assets.
2. There are two basic types of stock - common and preferred shares. What should someone know about each type?
Shareholders of common stock usually have voting rights and investors purchase common shares for growth potential. While preferred shareholders usually don’t have voting rights, they have priority over common stock if a company goes bankrupt. Investors purchase preferred shares for income since they pay higher dividends than common shares.
3. What are some of the basics involved in purchasing a stock?
To buy stocks you’ll need a brokerage account either online - where commissions and fees tend to be lower – or through a traditional stockbroker.
The most important aspect of buying stocks is thoroughly researching companies. You can use research from companies like Standard & Poor and Value Line, and www.morningstar.com is a useful website.
4. What are some of the types of stocks investors should consider?
Location (Domestic vs. Foreign) – Most investors should have a mix of US and international stocks since foreign markets can do better than the US market at times (and vice versa).
Style (Growth vs. Value) – The earnings of “growth” stocks are expected to grow at above-average rates and “value” stocks are thought to be undervalued. It's usually a good idea to have a mix of both styles in your portfolio.
Size (Market Cap) – Larger companies tend to be more stable and pay higher dividends while smaller companies have been more volatile but have performed better historically. Since past performance is no guarantee of future results, consider having exposure to both large and small stocks.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Thursday, March 18, 2010
Sunday, March 7, 2010
Cash Reserves
This is from one of my recent weekly "Smart Money Monday" Segments on Waco/Temple/Killeen NBC affiliate KCEN 6.
Why is important to have a cash reserve?
You should have a cash reserve for three reasons: (1) to avoid running up credit card debt to cover unexpected expenses, (2) to have funds on hand to cover your living expenses for a while if you lost your job, and (3) to have money available to take advantage of an investment or other buying opportunity.
How much should someone keep in a reserve?
A good rule of thumb is to have from 3 to 6 months of living expenses in a reserve. If your income is steady and your job is secure, then 3 months might be fine. But if your income fluctuates or your job isn’t secure, then you should err on the side of caution and build a larger reserve.
How should someone balance the need to keep the funds liquid so they can be accessed quickly with the desire to earn higher returns?
Your cash reserve should have several levels in order to strike a balance between liquidity and higher returns. Consider using the following types of accounts and investments for your reserve funds:
Checking Account – Keep enough in your checking account to avoid bouncing checks and overdraft fees.
High Yield Savings or Money Market Account – This should be the next level of your reserves and can be kept at your local bank or online. Make sure it’s linked to your checking account so you can transfer funds back and forth easily.
Certificates of Deposit (CDs) – CDs earn higher interest rates but most have early withdrawal penalties. You can ladder CDs so you have one coming due every month, quarter, or semi-annually depending on your needs.
No-Load Short-Term Bond Fund – A short-term bond fund will have a higher yield but your principal balance will fluctuate so it shouldn’t be used for money you’re planning on spending soon.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Why is important to have a cash reserve?
You should have a cash reserve for three reasons: (1) to avoid running up credit card debt to cover unexpected expenses, (2) to have funds on hand to cover your living expenses for a while if you lost your job, and (3) to have money available to take advantage of an investment or other buying opportunity.
How much should someone keep in a reserve?
A good rule of thumb is to have from 3 to 6 months of living expenses in a reserve. If your income is steady and your job is secure, then 3 months might be fine. But if your income fluctuates or your job isn’t secure, then you should err on the side of caution and build a larger reserve.
How should someone balance the need to keep the funds liquid so they can be accessed quickly with the desire to earn higher returns?
Your cash reserve should have several levels in order to strike a balance between liquidity and higher returns. Consider using the following types of accounts and investments for your reserve funds:
Checking Account – Keep enough in your checking account to avoid bouncing checks and overdraft fees.
High Yield Savings or Money Market Account – This should be the next level of your reserves and can be kept at your local bank or online. Make sure it’s linked to your checking account so you can transfer funds back and forth easily.
Certificates of Deposit (CDs) – CDs earn higher interest rates but most have early withdrawal penalties. You can ladder CDs so you have one coming due every month, quarter, or semi-annually depending on your needs.
No-Load Short-Term Bond Fund – A short-term bond fund will have a higher yield but your principal balance will fluctuate so it shouldn’t be used for money you’re planning on spending soon.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
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