Saving for retirement in a tax-advantaged account, such as a 401(k) or individual retirement account.
Starting an emergency savings fund that covers six months of living expenses.
“For the vast majority of Americans, tackling those three priorities is going to more than chew up that $5,000,” he says.
And there’s a reason why paying debt is at the top of the list: You’ll get a higher risk-free rate of return by paying down credit card debt than you will investing in financial securities. As McBride says, “Paying off a 15 percent credit card balance is like earning 15 percent risk-free.”
But let’s assume you’ve paid off your debt, contribute to a 401(k) or IRA and have enough savings for a rainy day. Now you’re ready to sit down at the table. The experts might have different tastes, but they all agree on one thing: You have to know what you’re ordering.
In other words, if you don’t understand what you’re investing in, you might make some mistakes.
“The power of investing comes from compounded returns and time, and if you don’t understand what you’re doing and you’re afraid to ask questions, when the inevitable hiccup comes in the market,” Thakor says, “you will be more likely to change your course.”
Whatever it is, big life changes can bring on the need for equally significant financial adjustments.
Once you’ve had time to process what’s coming, it’s natural to begin thinking about all of the money moves you have (and haven’t yet) made to date that could help set you up for success in this new chapter of life.
Do you have enough in savings? Should you consider buying a bigger — or smaller — house? Is it time to sit down with a financial pro and review your investment portfolio?
To help you navigate some of the most significant life-changing moments, we spoke to certified financial planners for their thoughts on how you may want to reboot your finances for what’s to come.
Life Changer No. 1: You’re Expecting a Baby
Considering that the average cost to raise a child now clocks in at over $245,000, it’s safe to say that this milestone tops our list of moments in life when your finances could probably use a reboot.
Step 1: If you haven’t already started estate planning, and named a guardian for your baby, now’s the time.
“You don’t want your child to end up a ward of the state if you [and your partner] should die,” says Michael Goldman, a certified financial planner and founder of Goldman Financial Planning in Falmouth, Maine.
And while we’re on the topic, you should also give thought to life insurance, which can help take care of your child should something unforeseen happen to you. A policy that’s active and in good standing can make up for your lost income, as well as help provide for your family’s future living and educational expenses.
Step 2: Your next new-parent to-do is to consider starting a college fund when your little one is still in diapers.
You heard right. That early.
According to FinAid, if you start socking away for college with the birth of a child, the money saved during that first year could be worth about five times as much (assuming a 10% return) than if you were to begin saving the year before your kid heads to college.
Similar to a 401(k), a 529 college savings account enables you to funnel up to $14,000 a year, per parent, into a tax-deferred account. And although you can’t deduct the contribution from your federal taxes, you won’t owe taxes on the growth — as long as it’s used for qualified educational expenses.
Life Changer No. 2: You Nab a New Job — or Lose One
If you’re like many people riding the high of scoring a new, higher-paying gig, your first inclination may be to book a trip to Rio or upgrade your wheels.
And that’s exactly why now’s a prime time to take another look at your investment game plan before that first fatter paycheck hits your checking account.
“It’s actually an ideal time to raise your savings because you won’t even notice it,” adds certified financial planner Chuck Roberts, founder and CEO of Financial Freedom Planners in Richmond, Virginia.
Step 1: Aim to create a plan that enables you to use 10 percent of your extra income for indulgences — and earmark the rest for paying off debt, padding your emergency savings, and investing for the future, suggests Goldman.
And be sure to also think about new I.R.S. implications, particularly if your salary now bumps you into a different tax bracket.
For example, you can consider contributing a greater portion of your paycheck into your 401(k) plan, especially if you’re eligible to receive an employer match.
“The 401(k) max is $18,000 for the year,” Roberts says. “And the truth is that most people aren’t maxing it out.”
Step 2: If you’re planning for a shorter-term goal — like buying a house — consider funneling some of your increased earnings into a traditional savings account designated specifically for that financial goal.
If you have a longer time horizon of at least five years, you can also consider investing in a high-quality, higher-yield mutual fund or an exchange-traded fund, or ETF.
But keep in mind that other financial priorities should come first — such as building up a healthy rainy day fund of ideally six months’ worth of your take-home pay.
While you—and your kids—can take out loans to finance everything from college to a home, you can’t take out a loan to finance your golden years.
Bottom line: Your employment situation could change at any time, says Goldman, so don’t get too used to living on that plum raise.
To that point, if you do find yourself suddenly unemployed, experts say that it doesn’t necessarily signal a time for drastic action.
“If you’ve done your job in regard to having a sufficient emergency fund, you may not need to change your investment strategy — at least initially,” Roberts says.
For example, if you receive a severance package, Roberts suggests keeping that money in liquid form until you find new employment. “Then when things get back to normal, you can focus on investing as you did before the job loss,” he adds.
This approach helps buffer you in the event that you burn through your emergency funds because it takes longer than you anticipated to secure a new gig.
Life Changer No. 3: You Become an Empty Nester
Whether you have one child or several, sending your grown kid off into the world can be an emotionally charged time — so it’s not surprising that personal finances can be the last thing on Mom and Dad’s mind.
But the minute your kids are on firm financial footing as adults, you should consider taking stock of your own money situation — particularly what you might need to do to ramp up saving for retirement.
Step 1: “At this point in their lives, people should start catching up on their savings,” Goldman says.
So in addition to ramping up your 401(k) contributions, says Goldman, you should consider putting money into a Roth IRA, if you’re eligible.
A Roth differs from a traditional IRA in that you pay taxes upfront at today’s tax rates. In return, you don’t have to pay taxes on your investment earnings when you withdraw the funds at retirement.
But there are specific rules and income limits for opening a Roth, so be sure to do your research first. If and when you do become eligible, you can also consider doing a Roth conversion from a traditional IRA, if you’ve held the funds in a non-deductible IRA for a year.
Step 2: While it may be tempting to funnel all of your money into retirement savings the moment junior nabs his first post-college gig, it might not be your best bet just yet.
Translation: You don’t want to get overconfident about your child’s independence.
“After their college years, your kids may need more help than just a roll of quarters for laundry, so you may want to keep some of your assets available,” says Sarah Maskill, a certified financial planner and founder of Financial Answers in Somers, Connecticut.
Just remember this one golden rule of financial planning: While you — and your kids — can take out loans to finance everything from college to a new home, you can’t take out a loan to finance your golden years.
Life Changer No. 4: You Cycle Into the ‘Sandwich Generation’
According to a Pew Research Center study on the sandwich generation, about 15 percent of adults between the ages of 40 and 59 find themselves having to provide support to an aging parent and a minor child — at the same time.
In other words, they’ve joined what’s often referred to as the sandwich generation — an unenviable membership that can take a toll on your finances.
Step 1: “If you are indeed supporting both sides, you may need to build up your emergency fund,” Roberts says.
So, maybe instead of having three to six months of net take-home pay saved up, you have nine.
And as tempting as it may be to dip into your retirement nest egg to help pay for eldercare expenses as they crop up, resist the urge and find time to talk to a financial pro before you make any such moves.
Step 2: It’s also important to think about what may need to be done to safeguard your parents’ finances — to help keep them from putting undue strain on yours.
“It’s best to have conversations with your parents early, when everyone is still healthy,” Goldman says.
So do a deep dive into their finances as a team, making sure to compile an inventory of all your parents’ bank, retirement and investment accounts — along with the necessary passwords.
It’s also helpful to broach executorship decisions, end-of-life wishes and, perhaps most important, long-term care plans.
Long-term care insurance, says Goldman, can help pay for such costly eldercare expenses as regular home visits from a nurse.
Another key to-do? Figure out who has power of attorney, adds Goldman, especially if your parents are contending with Alzheimer’s or dementia.
Life Changer No. 5: You’re Getting Close to Retirement
Congratulations! According to the calendar, you are just a few years out from calling it quits — and doing that daily commute for the last time.
To help protect yourself from market volatility, dial down the aggression in your portfolio by rebalancing your asset mix to focus on less volatile investments.
But in order to help set yourself up for a successful new chapter of life in your golden years, you may want to consider making some fine-tune adjustments to your investment strategy.
Step 1: You’re now at a stage when you may not have time to wait for the market to recover from downward swings.
So to help protect yourself from market volatility, dial down the aggression in your portfolio by rebalancing your asset mix to focus on less volatile investments.
Step 2: It’s also time to start thinking about when you or you and your spouse will start taking advantage of your Social Security benefits — ideally in conjunction with a financial professional.
It all depends on your individual financial situation as you near retirement, but you may opt for anywhere between the ages of 62 and 70.
“There is strategy as far as coordinating with the benefits of a spouse, and there are thousands of permutations on what is the best thing for you to do,” Goldman says.
To help keep track of your money, and get an estimate of future benefits payouts, you can sign up for a My Social Security account.
Life can pose all sorts of ups and downs — some welcome and others less so — but if you thoughtfully navigate these reboots, you can help keep your finances on track.
When you buy a home, you agree to make that payment for 30 years, come hell or high water.
The lower down payment amount is more appealing to renters, who are likely to be first time homebuyers, because their willingness to buy increased by over 40 percent, the study found. Out of the renters, 50 percent chose the smaller down payment compared to 36 percent of current homeowners.
“Even just looking at owners, the reaction is stronger for those with lower current (housing and non-housing) wealth, lower income and lower credit scores,” Fuster and Zafar wrote in their research paper. “This finding is important since it suggests that liquidity constraints play a substantial role in individuals’ willingness and ability to pay for a home.”
The study also examined a scenario where either a 6.5 percent or 4.5 percent mortgage rate was offered. Consumers aren’t as influenced by lower rates, and their willingness to purchase a home was only reduced by 5 percent when they were offered the higher rate.
“The mortgage rate may play a less important role than commonly thought,” the authors wrote.
Depending on your current income, credit score and the amount you have saved for a down payment, either the lower upfront cost or interest you will pay for the next 30 years, will be more appealing and play a larger factor in your decision making.
Pros of a Lower Down Payment
Most homebuyers should opt for a lower down payment over a lower interest rate, said Tim Lucas, editor of MyMortgageInsider.com, a Bellevue, Washington, mortgage website for consumers.
“When you buy a home, you agree to make that payment for 30 years, come hell or high water,” he said. “If you lose your job or have a medical emergency, you need a war chest stashed somewhere to weather the storm.”
Allocating the majority of your savings to make the maximum down payment could result having a homeowner lose both his down payment and home if there is a downturn in the economy and he isn’t able to make mortgage payments.
“In today’s lending environment, even a ‘high rate’ is about 3 percent below average rates over the past 40 years,” Lucas said. “Someone who chooses a low down payment mortgage program will still get a pretty sweet rate.”
A lower down payment means homeowners have to shell out extra money by paying private mortgage insurance, or PMI, which is often another $100 or $200 a month.
“Before making the decision in favor of a low down payment, be sure you know what the mortgage will cost you,” said Mary Blanchard, a vice president with PrivatePlus Mortgage, an Atlanta-based mortgage company. “Putting less money down may mean you pay a higher interest rate, you may have a higher monthly payment and it might necessitate your having PMI.”
Consumers who are purchasing their first home and have a good credit score often don’t have to put the traditional 20 percent down payment for the house, she said.
“A lower down payment can encourage some buyers in certain buying scenarios,” Blanchard said. “A lower down payment may enable them to buy and still have a lower rate, which is typically within a half point of the rate they would get with a larger down payment.”
Advantages of Lower Interest Rates
While a lower down payment might be more appealing for a first time homebuyer, it can often result in paying more money just on the interest alone, said David Reiss, a law professor at Brooklyn Law School in Brooklyn, New York. Lenders offer mortgage rates largely based on the credit score of the homeowner, so a cheaper interest rate may not always be available.
Let’s say the homebuyer is considering a $100,000 property that is paid for with a $90,000 interest-only mortgage with a 4 percent interest rate and a $10,000 down payment or with a $95,000 interest-only mortgage with a 5 percent interest rate and a $5,000 down payment.
The first mortgage means the consumer would pay $3,600 a year in interest. However, the second mortgage results in the consumer paying $4,750 a year in interest.
“That is not an apples-to-apples comparison, because the second mortgage interest payment reflects the higher loan to value ratio and the higher interest rate and it also does not take into account the tax treatment of interest payments,” he said.
Homeowners need to decide if paying additional money in interest is “worth it,” since a consumer would pay about $1,000 a year more in interest for the “privilege of paying the lower down payment,” Reiss said.
“I think that it is smart to figure out how to pay as low of an interest rate as possible, given the other financial constraints you face,” he said.
Many consumers believe there isn’t much of a difference between a 3.5 or 4 percent mortgage rate, but it can result in another few hundred dollars each month in mortgage payments, which can add up easily in 30 years.
“That is real money,” Reiss said. “You want to do everything you can to get the interest rate down, especially in today’s low interest rate environment.”
Refinancing a mortgage in the current market conditions means your rate isn’t likely to decline much, so receiving a lower rate now will have a larger impact over the next 30 years, he said. After paying closing costs, many homeowners don’t see the impact of the lower rates until the fourth year after the refinancing occurred.
“Since refinancing requires a large upfront cost of thousands of dollars, you need to live there long enough for it to make sense if you are only saving less than 1 percent on your mortgage rate,” he said.
Although a consumer would have less savings by putting down a larger down payment, there are few cons to having a lower payment since they would have “more skin in the game,” said Tony Sachs, chief lending officer at Sindeo, a San Francisco mortgage marketplace.
Beyond examining the mortgage rate and down payment, potential homebuyers need to also factor in paying for insurance and property taxes.
“Most people are very rate sensitive and tend not to think about other costs associated with home ownership,” Blanchard said. “It is crucial to look at the big picture — not only the entire mortgage scenario, but also home ownership costs beyond the purchase and mortgage from utilities to maintenance and so on.”
Generally speaking, millennials are more interested in experiences than material things.
Brian Koss, executive vice president of Mortgage Network in Massachusetts, said millennials are putting off buying for multiple reasons — some are financial, some are emotional and some are quality of life issues.
“Generally speaking, millennials are more interested in experiences than material things,” Koss said. “They prioritize time with friends and personal time over financial achievement. For example, they will choose living somewhere that is convenient and suits their lifestyle, rather building equity in a less exciting town or neighborhood.”
Koss said since many millennials choose to live where they can’t afford to buy — it’s easier to rent. However, on the other hand rent is so high, it makes saving for a home impossible.
“Emotionally, many millennials view homeownership as a huge risk,” Koss added. “Because they saw family members deeply affected by the housing crisis, the American Dream is not only unattractive to many, but seems like a nightmare.”
John William Barger, a realtor in Tampa Bay, Florida, not only sells mainly to millennials, but is one himself.
“I can say without a doubt that my generation is waiting longer and longer to buy a home, and as prices continue to rise, it is becoming harder and harder to find anything in the $100,000 to $200,000 range,” Barger said.
Several factors have contributed to this trend, he said.
First, most millennials graduated college during the Great Recession, and most didn’t find suitable employment out of college. Couple that with crippling monthly student loan payments, and most people under the age of 35 can barely afford to rent an apartment, let alone save up for a down payment on a home.
He added that, culturally, millennials like instant gratification which translates to move-in ready homes, though at their price level, a fixer-upper is the best most can afford, he adds.
“This generation more and more eschews debt as well, tainted by their experience both with student loans as well as what they may have seen and experienced in their own families during the past five to ten years,” Barger said.
“As a result, I have several clients who have elected to live with their parents until 28 or even 30, choosing to take the money they would have been applying to rent and utilities towards a down payment on a home,” he said.
Millennials tend to have a dysfunctional relationship with investing. Many of us were just coming of age when the 2008 Recession hit full force, and this has resulted in a deep distrust of the stock market in many young adults. According to a 2014 study, only 46 percent of millennials have an investment account of any kind (IRA, 401(k), etc.). While a few more are saving some cash for retirement (55 percent), it seems that a combination of stock market mistrust, school loans and other debts, and a general lack of knowledge are keeping millennials from preparing for retirement in a meaningful way.
It’s not a good thing, but as a member of this generation, I know there’s a lot of time to turn things around. That’s what I want to talk about here. And it all starts with education. As soon as you start to understand how investment works, and how it is likely to impact your future, you’ll want to to start investing. I know this from personal experience. As a member of this generation, I know what it’s like to make these changes and start getting prepared for the future. But you’ve got to start from the beginning.
Why Invest at All?
Not a stupid question. I’m glad you asked. Money loses value over time. This is due to inflation. If you have $10,000 hidden under your mattress, it’s not going to have the same amount of buying power in 40 years when you take it out to pay for your retirement. Inflation is the reason that $1 no longer buys a gallon of gasoline. You’ve got to do something with your money to make it grow faster than the inflation rate. And that requires you to take a risk.
Risk is inherent in all forms of investment. In the 2008 Recession, and in the fallout of the recent stock market drop in China, a lot of people lost a lot of money. If you look at the stock market from the outside, it might seem like a giant random casino. But if you take a look at history, it’s got some important patterns that you can start to recognize. Key Fact: The stock market rises more often than it falls. So, if you invest money in the stock market for decades, you have a very high probability of coming out with a lot more money than you started with. But, you’ve got to invest it the right way.
How Do You Invest in the Stock Market Without Losing Everything?
This is something that’s important to address. For people who don’t know a lot about the stock market, it’ll seem like some people win big while others lose it all, and that there’s not much you can do to prevent big setbacks. While there’s no risk-proof investment strategy, there are some approaches which are tried and true methods that have worked for millions of people. There are tons of ways to invest, but I’m going to outline a common “conservative” investment strategy that’s great for people who have never before invested for retirement.
When people succeed at stock market investment, it’s usually because they have diversified wisely. Diversification is built upon the knowledge that investing in just one or several stocks is likely to end in disaster. There are hundreds of factors that go into the value of individual stocks, and if you don’t spread out your risk, you’re likely to lose everything. Think of it like a bed of nails. You wouldn’t lay down on a bed made up of 10 nails. But if you make a bed of 500 or 1,000 nails, this lowers the risk factor considerably.
That’s where mutual funds come in. There are lots of different funds, but the ones I typically recommend to new investors are Index Mutual Funds. These funds are made up of lots of little bits of shares, taken from all the best performing stocks in individual markets. As individual stocks fall away, they’re replaced by new, better-performing stocks. ETFs are mutual funds traded just like stocks. They’re a little cheaper to trade, and they’re what I’ll recommend later on.
Index mutual funds tend to mirror the patterns of the overall markets they’re a part of. So if you started investing in IMFs in 1980, according to the chart above, you can see how many times over your initial investment would have grown. Of course, there are certain situations which don’t work out for investors, like people who invested in 2000, then divested themselves in 2009. But generally speaking, if you keep these funds active for decades, you will see big growth.
Plus, there are ways to insulate yourself as you get older. Say you are 24 years old, and you’re setting up your first investment account. You’ll have to decide how much of your investment money you want to put into stocks and bonds.Bond markets jump around a lot less than stocks, meaning there’s less risk and less reward. A strategy for many investors is to change their stock/bond allocation with time, putting more of their money into bonds. Bonds won’t provide much growth, but they’ll still beat inflation, thus preserving buying power, and they are extremely unlikely to result in a sudden loss of your money just before retirement.
So How Do I Do It?
The best way to get the process going is to take advantage of tax-sheltered investment accounts. If you have a job that offers a 401(k), you’ll want to be maxing that out every year, because your contributions are matched by your employer (free money). You should also create a Traditional or Roth IRA with a company such as Vanguard or Betterment (though there are many other options). You can check out the differences between those two accounts on your own time, but both are ways the government allows normal people to save for retirement without having to pay so much in taxes.
A company like Betterment is good for people who want a good range of ETFs picked out and organized for them. Go with Vanguard if you want to do-it-yourself and save a little money. But in either case, you’ll be able to easily start the process of meaningful retirement investment, and both sites will give you lots of resources to help you plan out your goals.
What Else Should I Know?
There’s no end to what can be learned about investment. But there are some important concepts to understand before you begin.
Compound interest: This is one of the coolest parts of investing. As you invest, you earn interest. That interest can be added to the investment pot and earn its own interest. The longer you do this, the faster your investments grow. It’s been called the most powerful force in investing.
‘Buy and hold’: If you follow investment media, you know that analysts and reporters love to freak out over changes to the stock market. Don’t listen to them. If you adopt the strategy I’ve laid out above, your investment is almost sure to survive the occasional drops that always happen in investing. Just remember that, historically, the market grows more than it declines. It is very likely to continue this trend during your lifetime.
Contributions: Of course, you’re not just going to invest a lump sum and let it sit for the next 40 years. You’re going to make regular contributions to combine with the interest and dividends you’re earning from your initial investment. Tax sheltered investment accounts have yearly maximum contribution amounts.
Predicting the market: Danger! Danger! Lots of writers and thinkers have concluded that economic markets are way too complicated for any one person to comprehend. People will sometimes recommend buying and selling stocks all the time to try to take advantage of high and low points. This isn’t recommended and frequently turns sound investment strategy into pure gambling.
I could talk about beginning investment forever, but this is a good place to start. If you have questions or comments, write them down below and I’ll address them in a future post. Generally speaking, retirement investment isn’t rocket science. If you’re a young adult, you’ve probably still got plenty of time to get the ball rolling with retirement investment. Start now, do a little research and you’ll start to see your future look a whole lot more secure. The strategy I mapped out above is likely to work out over years and decades, so if you do nothing else, I recommend you start investing this way today.
The ambiguous monetary policies implemented by central banks, like the U.S Federal Reserve, are beginning to dampen sentiment in the corporate world, according to the former president of the World Bank.
Robert Zoellick, now the chairman of Goldman Sachs International Advisers, told CNBC Thursday that the current challenge facing policymakers was how they communicated their future strategies and how that was impacting productivity and the fundamentals of growth in the business community.
“I personally think that you’re getting to a point, particularly in the United States, where the QE (quantitative easing) policies are creating greater uncertainty, And that affects the business climate,” he said, speaking at a Goldman Sachs symposium being held in London.
“So far in the United States you still have sort of reasonable growth based on the consumption sector, which is based on income and that’s based on jobs. But, it’s been the slowest recovery in the United States ever….so I think these are some of the fundamentals that frankly go beyond what central bankers can address.”
Zoellick said you could argue that the Federal Reserve is acting too slow in ending its era of easy monetary policing. He added that there were scenarios that could significantly surprise investors and global asset markets as the Fed begins to normalize interest rates.
“If the U.S. economy does start to pick up more over the course of 2016 and 2017 could (the Fed) be caught behind the curve?,” he asked. “That is something that the markets are not at all ready for.”
He signaled that forecasts from the central bank still predict the U.S. will have a “negative” real interest rate a year from now. A real interest rate has been adjusted to remove the effects of inflation to reflect the real cost of funds that a borrower faces.
“Given the fact the you have about (a) 5.1 percent unemployment (rate), that’s a question mark about whether they’ll (the Fed) get caught behind the curve,” he added.
There seemed to be little ambiguity from Fed Chair Janet Yellen on Wednesday when she said that December would be a “live possibility” for a rate hike if the upcoming data are supportive.
Testifying before the House Financial Services Committee, her words were taken as decidedly hawkish and the probability of a Fed rate hike next month increased to about 60 percent afterwards, according to the CME Group.
Millennials have been less inclined to own stocks than their parents are. About 26 percent of Americans under the age of 30 own stocks compared to 58 percent of baby boomers, according to Bankrate.com.
But the young investors who are jumping into the market are choosing very different stocks than their parents are.
In an exclusive analysis for CNBC.com, online portfolio manager SigFig examined 410,000 portfolios for 220,000 investors who had at least one stock holding. They identified which stocks were most likely to be owned by millennials compared to baby boomers, and vice versa. Turns out the two generations not only favor different companies, but different sectors, as well.
SigFig researchers found millennial investors are most likely to own stock in Advanced Micro Devices, SolarCity, Twitter, GoPro — andTesla, which they’re 2.7 times more likely to own than boomer investors. Boomers, meanwhile, tend to favor larger, well-established companies. They are more than five times more likely than millennial investors to own shares of Southern Co., an electric utility company, and about five times more likely to own shares of Honeywell, Duke Energy, Merck and Mondelez, a multinational food and beverage conglomerate.
Why the disparity? Age explains a lot of it. For one, millennials are in the accumulation phase, said Marla Mason, a certified financial planner and vice president of the Colorado-based brokerage firm America’s Retirement Store. “They are looking for growth,” she said. “They are not necessarily looking for their grandfather’s portfolio of large blue-chip, dividend-paying stocks and bonds.”
Millennials are also more likely than their parents to pick stocks based on familiarity, looking at companies that produce products they use, she added. That hasn’t paid off in the short run; year to date, the boomers’ stock picks have outperformed the millennials’ favorite stocks. (See video.) But millennials do have more time to ride out the market’s ups and downs.
Still, if you’re a young investor, there are additional steps you can take to improve your chances of long-term financial success.
1. Get your finances in order. Before you even open an investment account, make sure you’ve paid off any credit card debt and that you have money set aside in a savings account in case you get hit with unexpected expenses or a job loss. Aim for enough to cover about three to six months’ worth of expenses.
“If you don’t have that money set aside first, then it really doesn’t make sense to put money aside in the markets,” said certified financial planner Charles Bennett Sachs of Private Wealth Counsel in Miami.
2. Fund your retirement account first. Before you open an investment account, make sure you’re taking full advantage of the benefits of tax-advantaged retirement accounts. Focus on maxing out your employer-sponsored plan before opening a regular investment account. For 2015, you can contribute up to $18,000 in your 401(k).
At the least, make sure you’re contributing enough to get any employer match available to you. “If your employer matches, you want to max that out because you won’t get that kind of return with the stock market [alone],” said Zach Abrams, manager of wealth management at Capital Advisors in Ohio.
If you don’t have access to a 401(k), you can contribute up to $5,500 this year into a Roth IRA or a regular IRA. A Roth IRA lets you grow your money tax free, but you do pay taxes on contributions. With a regular IRA, you’ll be taxed when you start taking money out, but you won’t pay taxes in the meantime on annual gains.
3. Keep costs down. If you have money left over to open an investment account, try to make sure you’re keeping as much of your money as you can. Look for brokerage firms that have low commissions and low fees like Schwab, Vanguard, TD Ameritrade or Fidelity. Just make sure you are aware of all the fees associated with the funds you’re investing in, as well as trade commissions and any expenses associated with managing and maintaining your account. “Commissions can start eating you up,” warns Abrams, especially if you trade a lot. So it’s important to factor that in.
You could also try a roboadvisor service such as Wealthfront or Betterment. Neil Waxman, managing director at Capital Advisors, said this can be a good solution for a young investor because it is “low cost and you won’t have to do the research on your own.” The services offer fund suggestions based on your risk level, goals and timeline. The trade-off is that you have somewhat less flexibility with your investment choices.
4. Diversify. While you have time to ride out market volatility if you’re young, you still want to be sure you’re comfortable with the amount of money you’ve invested in particular stocks. “If you can’t commit that money for five years, it shouldn’t be in at all,” said Sachs. Ask yourself how long you plan to invest, how much realistically you can afford to invest and how comfortable you are with risk.
One way to lower your overall risk is by diversifying your portfolio, not just by investing in different stocks, but by considering different types of assets like CDs or bonds.
Whatever you choose, advisors recommend you do your research on the stocks or funds you invest in, checking analyst reports and ratings, and invest a little at a time so you can get a sense of your tolerance for risk.
“Keep it simple … as you start out,” said Sachs. “Get started and get in the habit and then you can start working toward more complex investing.”
The first wave of mid-sized oil and gas exploration and production companies has reported, and the results are more encouraging than many had anticipated. Production levels remain relatively high — in most cases at or near year-ago levels — yet capital expenditures are way down.
This means companies are employing new technologies and learning to produce more with less. Capital efficiency is increasing dramatically.
Read MoreFrackers change methods in ‘imploding’ oil market
Look at Marathon Oil, out last night after the bell. The loss of 20 cents was far less than the 40-cents expected loss. Sales volumes were higher than expected. Production expenses came in lower than expected. Capital expenditures for 2015 are being cut more than estimated, and projected capital expenditures for 2016 are also being slashed further.
Devon Energy also reported a sizable earnings beat (76 cents vs. 52 cents consensus), with production higher than expected, and spending lower than expected. For 2016, it looks like capital expenditures will be much lower, with production increasing in the low single-digits.
You see? Production steady, but spending much lower. Earnings somewhat better than expected. Doing more with less!
There was also Chesapeake Energy, which took a big writedown on its oil and natural gas properties, but even then, the loss was less than expected. Production growth was up 3 percent, but capital expenditures were down 35 percent quarter over quarter.
The goal for this quarter is to reassure the Street that: 1) commodity prices may remain low for some time and 2) we have the means to make money within the new capital restraints.
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There’s another story with some of the oil plays: lower debt expenses.
Look at Denbury Resources, a smaller E&P that operates in the Gulf Coast and rocky Mountain regions. The driller also had a good earnings beat due to lower than expected capital expenditures. Production is down slightly, but capital spending is down dramatically, and it is reducing spending even further in 2016.
Denbury had recently suspended its dividend, freeing up $88 million in cash. Much of that is going to reduce bank debt, which is now down to $210 million at the end of the third quarter, from $395 million at the end of 2014.
Look, these companies have had a terrible year and it’s still debatable whether oil has bottomed. And many will look askance on the fact that production levels are still high and see that as a negative.
But it is stunning to see how they are finding ways to survive with oil in the mid-$40s.
Anyone who is looking at the oil and gas business and not marveling at the technological innovation and the effort to increasing operating efficiency is not paying attention.
Investors are counting the days before the ongoing market rally returns stocks to an all-time high. But the wait is over—if you own the right stocks.
There are six companies in the Standard & Poor’s 500, including online retailer Amazon.com (AMZN), Google holding company Alphabet (GOOGL) and beauty product maker L Brands (LB) that are already trading at or above their all-time highs, according to a USA TODAY analysis of data from S&P Capital IQ.
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And there could be more where that came from. Thanks to the market’s recent rally, which has pushed the S&P 500 up more than 6% over the past month, there are 30 additional stocks that aren’t at all-time highs yet—but are less than 2% away.
Seeing so many stocks race close to record highs offers a vote of confidence for the market as it goes into what’s usually the strongest season for returns. The S&P 500 itself is just 1% away from its high-water mark of 2128.28 set in July. The S&P 500 is down roughly 7 points Wednesday at 2102.39.
Traders work on the floor of the New York Stock Exchange.
But there’s no more waiting for investors in Amazon.com, which has seen its shares more than double this year to $644.34—taking out its previous all-time high of $630.70. Amazon’s previous high was set in late October following the company’s surprising profit during the third quarter. If you back out the company’s three splits, a 2-for-1 in 1999 and 1998 and a 3-for-1 in 1999—the stock would be trading for an astounding $7,680 a share.
Tech definitely holds a pole position in the race to new highs. Alphabet—also coming off a strong third quarter for results—is trading for $756.55 a share—leaving behind its previous all-time high of $752.50 on Oct. 23. Investors continue to applaud the company’s highly profitable model of mining personal online data and selling those in aggregate to online advertisers. The company is expected to put up 12% growth in adjusted profit this fiscal year and another 18% growth in fiscal 2016.
A Taco Bell executive who lost this job after allegedly beating an Uber driver — an incident caught on video — was slapped Tuesday with further criminal charges that put him at risk of spending up to a year behind bars and paying a $10,000 fine.
Benjamin Golden, 32, who lives in Newport Beach, California, was charged with four misdemeanor counts by the Orange County District Attorney’s office on Tuesday, a day after a YouTube video of the Uber car incident went viral.
The DA accused Golden of assault on public transportation property, battery on a public transit employee with injury, assault and battery. Golden originally was charged with misdemeanor assault and public intoxication by Costa Mesa police.
Above: Details of new charges lodged Tuesday by prosecutors against ousted Taco Bell executive Ben Golden
“Based on the evidence, we filed the charges we believe we can prove beyond a reasonable doubt,” Roxi Fyad, spokeswoman for the Orange County DA’s office, told CNBC. Fyad said the video of the attack factored into the decision to charge Golden with the additional criminal counts.
The DA’s office said in a statement that it would seek a $20,000 bail for Golden, who currently is out on $500 bail following his arrest on Friday for allegedly attacking Uber driver Edward Caban. Golden is scheduled to be arraigned in court on Nov. 17.
Golden did not respond to messages requesting comment left by CNBC at multiple phone numbers and email addresses.
CNBC broke the news Monday that Golden, who had been leading Taco Bell’s mobile commerce and innovation initiatives, lost his job after his arrest on Friday. Golden spent more than seven years working for Taco Bell’s parent, Yum Brands.
“Given the behavior of the individual, it is clear he can no longer work for us,” Taco Bell said in a statement emailed to CNBC on Monday. “We have also offered and encouraged him to seek professional help.”
The YouTube video posted by Caban, which was taken from a camera mounted on his Uber car’s dashboard, shows Golden in the back seat Friday night at around 8 p.m.
The video reveals Caban repeatedly and unsuccessfully asking Golden for driving directions. Caban flips his camera around to show the inside of the car, and Golden topples over in the back seat with an audible thud as the driver makes a left turn.
Source: Louisville Metro Corrections Dept.
In the video, Caban eventually pulls over and orders Golden out the car, saying he is “too drunk” to give Caban directions. The driver warns that he will call police if Golden doesn’t get out. It’s at that point that the confrontation becomes violent.
The video of the incident has been viewed more than 1.3 million times on YouTube.
Police records show that Golden was arrested on July 8, 2012, in Louisville, Kentucky, on charges of operating a motor vehicle under the influence of alcohol.
According to a police report obtained by CNBC, Golden had bloodshot eyes and “fumbled through paperwork looking for registration.”
“When asked, subject stated that he had come from the Big Bar and had a couple of drinks, stating two,” the report said. “When pulled out of car, subject changed story to ‘three beers.’ ”
Golden then failed a field sobriety test, according to the report. He pleaded guilty to the charge a month later and received a sentence of 30 days in jail, 26 days of which were conditionally discharged, according to the Jefferson County Attorney’s office, which prosecuted the case.
Golden’s license was also suspended for one month, the prosecutor’s office said.
Golden’s LinkedIn account is no longer available, and his Twitter link was blocked from public sight, but on a cached version of his Twitter page, he describes himself with a simple statement: “Sushi lover. Bourbon drinker. The end.”