Cover image of The Investing for Beginners Podcast - Your Path to Financial Freedom
(229)

Rank #24 in Investing category

Business
Investing

The Investing for Beginners Podcast - Your Path to Financial Freedom

Updated 7 days ago

Rank #24 in Investing category

Business
Investing
Read more

How to Start Investing in the Stock Market for Beginners

Read more

How to Start Investing in the Stock Market for Beginners

iTunes Ratings

229 Ratings
Average Ratings
127
36
20
17
29

Not for beginners

By frankUAW - Aug 06 2019
Read more
This is not for beginners. Episode one VTI no definition, trailing stock, not defined.

A must listen !

By 130chris - Jul 30 2019
Read more
After listening to a few different podcasts I got completely sucked into this one. I Love how Andrew & Dave explain everything and don’t make me feel like I’m way outa my league. While I have a ton to learn, I’m always encouraged after listening to them. Thanks guys!

iTunes Ratings

229 Ratings
Average Ratings
127
36
20
17
29

Not for beginners

By frankUAW - Aug 06 2019
Read more
This is not for beginners. Episode one VTI no definition, trailing stock, not defined.

A must listen !

By 130chris - Jul 30 2019
Read more
After listening to a few different podcasts I got completely sucked into this one. I Love how Andrew & Dave explain everything and don’t make me feel like I’m way outa my league. While I have a ton to learn, I’m always encouraged after listening to them. Thanks guys!
Cover image of The Investing for Beginners Podcast - Your Path to Financial Freedom

The Investing for Beginners Podcast - Your Path to Financial Freedom

Updated 7 days ago

Rank #24 in Investing category

Read more

How to Start Investing in the Stock Market for Beginners

Rank #1: IFB01: Optimal Portfolio Diversification for Sectors and Individual Stocks

Podcast cover
Read more

  One of the most difficult ideas for beginners is the idea of diversification. If you read any investing publications they all talk about it. But they often don’t discuss the optimal diversification for sectors and individual stocks.  There is so much conflicting information regarding diversification. And how to set up your portfolio for maximum benefit. […]

The post IFB01: Optimal Portfolio Diversification for Sectors and Individual Stocks appeared first on Investing for Beginners 101.

Mar 01 2017
43 mins
Play

Rank #2: IFB114: Buying a Home vs Investing in the Stock Market

Podcast cover
Read more

Announcer:                        00:00                     You’re
tuned in to the Investing for Beginners podcast. Finally, step by step premium
investment guidance for beginners led by Andrew Sather and Dave Ahern. To
decode industry jargon, silence crippling confusion and help you overcome
emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:36                     All
right folks, welcome to Investing for Beginners podcast. This is episode 114
tonight, Andrew, and I are going to discuss a listener question. We got this
great question from Jack, and I’m going to take a moment to read the question
and then Andrew, and I will do our little back and forth and have some
discussion about it. So starting we have, Hello Andrew. I’m thinking about
buying a home monthly mortgage costs are currently cheaper than renting in my
area, and my family would be able to pay the down payment for me in cash. Do
you have any insight into the financial advantages and disadvantages of buying
a home? In this case, I have read the buying a home is not a great investment
unless you are renting it out due to the hidden costs of home buying. And the
fact that a house is a liability until you pay it off. Do you think I should
put the money I would use on buying a house to instead invest in a stock
market? I’d appreciate any insight you have into this topic. So Andrew, what
are your thoughts?

Andrew:                              01:30                     You
want to open this candle warm?

Dave:                                    01:32                     So
yeah, apparently, yeah, let’s crack it open.

Andrew:                              01:35                     Maybe
let’s, yeah, let’s talk about the biggest financial decision that most middle-class
Americans make and how that relates to their finances. It’s a very obviously
emotionally charged topic. , and there’s a lot of different things and kind of
like we mentioned in the personal finance series, it’s very personal. So try to
listen through the whole thing without making the concluding decision on it for
your own life. , I’m going to try to just kind of think about all of the things
I know about it and maybe it will help shine some light for people who are
considering this. Maybe it helps if I talk about maybe where I’m coming from
with the context of it, I would consider myself the furthest thing from an
expert on mortgages and homes that you can find.

Andrew:                              02:29                     I
mean, I still don’t know, like I know there’s like multiple agents when it
comes to closing and then all this blah blah blah. And I like, that’s all just
like [inaudible] I have no idea. I was talking to like a home stager the other
day, and she was trying to explain to me how she works with a type of real
estate agent. I was just like, Huh. So I don’t know about that aspect. What I
do know is the financial aspect of it. And I also know that it’s something that
a, I’ve been considering him for quite a while, like in the like half a decade.
, B, it’s something I’ve, I’ve run a ton of numbers and spreadsheets I should
come to. Nobody’s surprise about the different kinds of ramifications behind
it. , I have, I’ve researched some of the historical data too. And so the,
there’s a, I think I can help somewhat.

Andrew:                              03:22                     The
first thing I guess that comes to mind is you want to think, so for me the,
these are some of the benefits I see for buying a home in general because my
kind of weird take on it being somebody who’s 29 in that millennial category
that I shudder just with that word millennial. But I, I’m in the millennial
category, and you know, the typical kind of American dream picture story was
always to buy a home, own it and live in it. And retire in it. , and as all the
news outlets and internet blogs and websites will love to tell you I’m
homeownership is down among millennials. It’s been trending in the opposite
direction, and they want to blame either Avocados or student loan debt or
Airbnb, I don’t know, pick, pick, pick your poison. Right? So there’s, it’s an
evolving and moving landscape.

Andrew:                              04:24                     And
I think in general the attitudes around buying a home are changing, at least
the public viewpoints on it compared to let’s say like 2015 to 2019. I think
people are maybe more open to this crazy alternative where somebody doesn’t
want to buy a home. So like in my case, love my parents where they’ve been
pressuring me to buy a home for quite a while. I do admit I’m in an area, in
Raleigh, in the, in the south where home prices are very, very good and it
probably would be a great investment for me. That being said, you have to kind
of weigh the pros and the cons when it comes to, there’s a lot of hidden costs
and hidden time sinks that come with buying a home. So you want to budget home
maintenance, and I don’t know what that would mean for anybody, what I’ve seen
online or our figures such as, uh, what is it like somewhere between one to 5%
of the purchase price per year is what you should budget for maintenance.

Andrew:                              05:36                     So,
you know, you might be living in the house, and the roof needs work, or the
HVAC goes out, you know, your toilet or your sink gets clogged. These are all
things that may be in the past. If you’re renting with an apartment complex,
they will take care of that. Now you have to take care of that. And so I think
a lot of people, particularly first time home buyers, obviously I’m going to be
a first time home buyer. That’s something to consider. Uh, secondly, you know,
there’s going to be a lot of maintenance, particularly if you have a nice big
backyard here in Raleigh. We have lots of trees. And so I have a friend who’s
around my age, and he recently bought a house. And then the thing about having
trees everywhere is you have to trim them down. Some of them kind of die and
they might, again, I’m not an expert, I think.

Andrew:                              06:26                     I
think if you have a sick tree, it gets the other trees sick and then they can
collapse and ruin your home. Uh, you have to trim them. You have to cut them
down. And you have to get a specialist to cut them in the right way, so it
doesn’t crash into your neighbor’s home. , you have to clean the gathers
because a lot of trees will make a lot of the leaves. Uh, lots of different
things. And then if like my friend’s family in southern California, it’s an
unwritten rule. If you have a bad looking lawn that you’re pretty much your
life’s out of control. So you need to make sure you have that maintained. And,
and for a lot of people that come from my area where I grew up, that means
hiring maintenance people, groundskeeping people because, uh, generally we’re so
busy with our lives anyway, so a lot of, a lot of times sinks.

Andrew:                              07:15                     So
for me, you know, the trade-off between having a home and renting, renting is
more expensive. It’s not the best financial decision. But for me, uh, with how
busy my schedule is, how entrepreneurial my drive is, uh, that’s why I rent.
However, a huge benefit of buying a home. I think this should be obvious too,
is when you retire, uh, if you have a home that’s paid off, then that’s one
huge expense that you do not have to pay. And so now when we start to combine
that with the things we talk about with the stock market and investing, now you
can live on a lot lower of a dividend income, let’s say because you don’t have
a $2,000 rent payment or mortgage payment that you’re paying for. You pay that
off. So for me, longterm, I’m looking at, okay, cool, if I can pay off home by
the time I’m 65, well then I can kind of get the best of both worlds.

Andrew:                              08:13                     And
so when I’m, when the time is right, then maybe financially that that will
help. There’s so many different other financial advantages and disadvantages
when it comes to the down payment. The even we’re not talking about yet, like
the potential returns for mortgages versus, you know, real estate versus the
stock market. I don’t want to get there. Yeah, I don’t want to get too far
ahead. So that’s, that’s the context of my kind of backstory on why personally
I don’t have a home, but I plan to have a home and a lot of it eventually has
to do more with lifestyle than it does with financial, with finances.

Dave:                                    08:56                     But
there’s also that huge factor of let’s still remember retirement and the fact
that having to pay off home by the time you retire is going to be huge. So
that’s kind of where my first thoughts are. I would agree with all that. Those
are all fantastic points. I like the point about the lifestyle part of it
because that kind of hits home to me a somebody that has both owned homes and
we lived in apartments and gone through the buying of the home and the selling
of the home and all the ins and outs and funds of that. And then the, I guess
relative ease of renting an apartment and then moving in. You know, I have to
admit as somebody who lives in, in the Midwest and has to endure the winters,
and I do say in endure, uh, the fact that you don’t have to shovel your
driveway to go to work every day is a blessing, uh, beyond all measure.

Dave:                                    09:52                     And
you know, the that’s one of the things that a lot of people don’t, it’s not
discussed as much is the aspect of the upkeep slash maintenance of a home when
you buy it. And Jack is talking a little bit about the potential liabilities,
and that may not be up necessarily in money or large chunks of money, but it is
going to be, as Andrew said a time sink. And those are things that will take up
a large portion of your time. I was, uh, I was having nightmares slash
flashbacks of uh, Andrew talking about a home with lots of trees in the
backyard because the first thing is two things pop into my mind though. The
shade would be cool in the summer. And then the nightmare part of it would be
the leaves that you would have to pick up in the fall.

Dave:                                    10:44                     That
is a very long, tedious process. Now of course you can pay somebody to do that,
but then that starts to creep into this as an investment part of it when I
guess, so questions that I would ask myself as if I was in Jack’s shoes is he’s
mentioning that the mortgage costs are currently cheaper than renting in his
area. You know, I know none of us to have a crystal ball, and we could see into
the future. I certainly don’t. And I’ll give you an example of what I’m going to
illustrate here. If something that happened to me personally. So my wife and I,
when we bought a home in Minnesota, when we live there, uh, the mortgage costs
were cheaper than renting a because we were renting a home before we moved into
another home and it was cheaper. But what happened was, as the city that we
lived in, uh, they decided in their wise decision making to raise our taxes.

Dave:                                    11:43                     So
at first it was just an additional $100 a month on our mortgage. Then it became
$300, and then in two years, it went from our mortgage payment is what it was
to be $400 more in a little less than two years. And with more conversation
about, I’m raising it higher. So it quickly became way more expensive than we
were anticipating and that was a very unpleasant surprise. Then you have to
tack in all the other things that you have to do. The yard that we had for the
home, which was nice, was also bigger and it was far too big for my old bones
to have a push mower. So I had to buy a driving more, which are substantially
more expensive than a push or I could do a service, which is also very
expensive. So you know, those are all those things that I, we didn’t talk
through and have a plan for.

Dave:                                    12:39                     What
were we going to do when we got involved in that? Excuse me. And I also want to
illustrate something that Jack said that he said it’s not a great investment
and that is very much a truth. A, there’s a lot of fallacies out there about
different things, but buying a home is not an investment, and it is. I’ve
talked to bankers and mortgage brokers at Wells Fargo, and I work there, and
they all said the same thing. It is not an investment. Uh, if you’re looking at
it as an investment, then you need to do other things with it, like renting it
out or something along with those natures. , it is not an investment. And a
banker said to me one time, which I thought was kind of, uh, an astute judgment.
By and large, we’re going to be paying for somewhere to live for the rest of
our lives.

Dave:                                    13:27                     And
what is more important than necessarily owning a home is finding something
that’s going to fit your lifestyle. Andrew talked a lot about a lifestyle and
how that fits in with thing. And that is crucial because you’re going to be spending,
you know, you spend 40 to 50 hours a week at work depending on what it is you
do. And you spend the rest of that time at your home for the most part, unless
you’re like Andrew and you’re a party animal, and you’re out all the time. ,
he’s not a party animal, but, if, uh, so you’re going to spend a lot of time in
your home, so it has to be somewhere, you’re comfortable with you like you want
to be. And it, it, it, I guess the crucial thing is to think about what it is
you want for your life beyond just the money part of it.

Dave:                                    14:14                     You
know, where do you want to live? If you’re okay living in an apartment and it
fits all the different parts of your life that you want, then that’s great. And
if you want to be in a home because that fits your life and you know, you love
being outdoors; you love doing all the outdoor stuff, you, you ha, you know,
you’re way more handy than I am. I’m so not handy. And so having that ability
and those skills and wanting to do all that stuff, then a house is going to be
perfect for you. It’d be, you’d be miserable living in an apartment if that’s
the case. Uh, so those are things that I guess kind of spring to mind we are
doing, we are reading over this question and Andrew, and I were talking about
earlier, that was one of the things that I thought stuck out to me.

Announcer:                        14:59                     Hey
you, what’s the best way to get started in the market? Download Andrew’s free
Ebook at the stockmarketpdf.com
you won’t regret it. [inaudible]

Dave:                                    15:10                     Do
you have any other thoughts?

Andrew:                              15:12                     Yeah,
no, I love that. , the idea that a house is not an investment I think is

[inaudible]

to the guy’s point. They that you were talking about. Yeah, you do
have to pay, what is it, death and taxes, the only to certain things in life.
So exactly. You even you pay off the home, you still have to pay those property
taxes as you talked about in your example too. So like you say, you’re always
paying to live somewhere. The one thing I, and I don’t want to like attack real
estate investors or anything like that, but I think the, I, there’s this idea
to where I hear the lot, personal finance, podcasts, the personal finance
world. This idea that well, I’m going to buy or I’m going to get a mortgage and
then I’m going to use renters to pay the mortgage.

Andrew:                              16:03                     But
we, what would you need to understand is for one and Ramit Sethi, he’s a
personal finance expert. He, I saw a tweet months ago when he said this, but
for one rent and Margaret’s prices don’t always go up. And he had like a
perfect example where, I think it was in New York or something, but alike a
real-time example of, of how rents didn’t always go out. Margeson didn’t always
go up. So you lock in the mortgage. If the rents in your area go down, well,
what are you going to do? Either kick out your renters, or you’re, you’re just
going to have like a negative cashflow. And that’s in an ideal state, a case.
What about the nonideal case where let’s say we have a recession and now people
are flocking from whatever your house was renting that to something a little
bit less, you know, maybe like lower-income type apartments.

Andrew:                              16:57                     And
now either you’re, you’re struggling to find renters, or you’re having a lower
what your prices were and now your, your cashflow negative or used to be
cashflow positive. Or you know, what I think might even be more, more of, more
of a potential issue is as you can’t even fill it. And so now you have a front
the hole costs yourself and now all of a sudden you’re not, it’s not like an
investment for you. Not to mention. , there’s a reason why man, whether you
call them, the people who like Dave, like the people who do maintenance on the
home and they have them like, like attached to real estate investors. That name
is, it’s slipping my mind. A handyman likes management companies who, yeah,
they, they say like, oh, a turnkey real estate investment. Is it like
management companies? Yeah, I think so.

Andrew:                              17:53                     People
have the like deal with the renters, deal with noise complaints, deal with the
maintenance of a house. Like either, that’s going to be you, or you’re going to
have to hire that out, and you know, it’s not just this free thing. So I think
Dave Ramsey says all the time, it’s like you’re, you’re, you’re giving yourself
a full-time job when you become that. And today’s point, if you like to do that
kind of stuff, then great. But realize that that’s another time liability
versus the stock market, which we love to teach that you’re not giving yourself
a job. You’re researching the stocks and then occasionally updating yourself on
what’s going on with these stocks, but you’re not putting in, you know, 10 2030
hours a week maintaining properties or anything like that. So the idea, I think
that’s an older idea that has, I think through the years, especially through
the housing bubble, it’s, it’s an idea that’s changed over time.

Andrew:                              18:50                     That
real estate’s just like a no-risk investment. There’s a lot of risks and a lot
of ups and downs and, and a lot of liabilities both from expenses and from
time. So thinking, yeah, it’s, it’s a great investment if, if you’re renting it
out can also be, it could not be. So I think to be careful with that. The other
thing that pops to mind that I can give some contacts on being the type of
person I am with, you know, obviously wanting to see how the stock market
returned over very many decades. Lots of studies, lots of data, lots of
research saying that around 10% per year is what the stock market returns. You
take out the inflation; it’s a 7% normally nominal, nominal. Uh, so after
inflation it’s about 7%, 10% for the dollar amount. When it comes to real
estate, it was around 5% over a very, very long-time period.

Andrew:                              19:50                     But
what was interesting about that was depending on the area, the Oh the values of
real estate can fluctuate a lot more. So I think that’s something to keep in
mind. Yes, I think it can be a good investment. Yes. I think buying a home, you
know, and having it as an as a substantial asset for the rest of your life,
that’s a possibility. But I think some of the narratives behind the in the past
has always been, well, it’s like a guaranteed investment, whereas you really
need to be thoughtful and try to plan for all of the potential liabilities that
come with it and understand that it’s not anymore guaranteed than putting money
into the stock market is. And it’s a potentially a lot more hands-on than the
stock market would be.

Dave:                                    20:40                     All
right folks, we’ll, that is going to wrap up our conversation for tonight. I
hope you enjoyed our conversation about buying or not buying a home and whether
it can be an investment or not. So those are some very deep things to think
about. And this, as Andrew said, it’s going to be the word just for most of us
asset wherever ever going to own possibly. So trying to think through all the
ramifications before you do it is very, very critical. So without any further
ado, I’m going to go ahead and sign this off. You guys have a great week. Go
out there and invest with a margin of safety and we’ll talk to y’all next week.

Announcer:                        21:11                     We
hope you enjoyed this content. Seven steps to understanding the stock market
show you precisely how to break down the numbers in an engaging and readable
way with real-life examples. Get access today at stockmarketpdf.com
until next time, have a prosperous day.

Announcer:                        21:37                     The
information contained is for general information and educational purposes only.
It is not intended for a substitute for legal, commercial and or financial
advice from a licensed professional review. Our full
disclaimer@einvestingforbeginners.com

The post IFB114: Buying a Home vs Investing in the Stock Market appeared first on Investing for Beginners 101.

Aug 08 2019
21 mins
Play

Rank #3: IFB43: Back to the Basics Pt 1: The Anatomy of Stocks and Shares

Podcast cover
Read more

This is part 1 of the 5 episode “Back to the Basics” series from The Investing for Beginners Podcast. Each episode covers the fundamentals of the stock market and investing to provide a solid foundation for those who are looking to compound their wealth over time. Here are the links to each of the episodes: […]

The post IFB43: Back to the Basics Pt 1: The Anatomy of Stocks and Shares appeared first on Investing for Beginners 101.

Dec 18 2017
31 mins
Play

Rank #4: IFB113: Charlie Munger’s “Invert, always Invert”

Podcast cover
Read more

Announcer:                        00:00                     You’re
tuned in to the Investing for Beginners podcast. Finally, step by step premium
investment guidance for beginners led by Andrew Sather and Dave Ahern. To
decode industry jargon, silence crippling confusion and help you overcome
emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:36                     All
right folks, we’ll welcome to Investing for Beginners podcast. This is episode
130 tonight, Andrew, and I are going to talk a little bit about they called an inversion.
I came across this great blog post from a gentleman named James Clear who talks
a lot about habits and developing different patterns and ways that we can think
better and work better with our minds and how we can set ourselves up to have
better processes in our lives. And he talked about inversion. So if those of
you who are not familiar with inversion, inversion means that you take
something and you turn it upside down, and you look at it from a different
angle or a different way. And I’ve talked a little bit about this in the past.
And Charlie Mugger is a big fan of a; I’m a big fan of Charlie monger. I was going
to say; he’s a big fan of mine. That’s so not true. , I’m a big fan of Charlie
Munger and the way he thinks. He’s a very, very deep guy.

Dave:                                    01:33                     And
he talks a lot about inversion in his blog posts, in his books, in his speeches
that he gives. And he’s always quoting this term, invert, always invert. And
you got that from a mathematician named, Carl Jacobi and this is a German
mathematician, and he was famous for figuring out very, very hard problems by
inverting them. And by, what he meant by this was that he would take a math
problem and look at the answer and try to work backward to try to figure out
how to solve the problem as opposed to looking at the problem and then moving
forward trying to figure out what the answer would be. And he felt like that
that was a powerful way for him to look at the roadblocks and figure out
backward how to look at things. And this is something that I do myself when I’m
trying to figure out how to work with different formulas and things that are a
little bit above my pay grade so to speak is I will look at the answers and
then try to figure out how they come to that conclusion.

Dave:                                    02:39                     And
that helps me learn how things work. And you may have heard of Marcus Aurelius,
he’s a famous stoic philosopher, and he was famous for this as well. And his
exercise, the things that he liked to do was to always look at the negative
aspects of something that could happen to you in life. And then think about all
the different ways that could come about. And when he would do this, it would
help him organize it in his head a to get over the fear of some of these
possible things happening, whatever it may be, let’s say losing your job or was
in, you know, a child or any of these other negative things. And if you look
back from those things and figure out what could go wrong for those to happen,
then you could work towards trying to avoid any of those things happening in
the future to you.

Dave:                                    03:29                     And
it also helps you overcome the fear of some of those things. Let’s say maybe a
more relevant term is let’s say you’re getting ready to ask out a girl for the
first time. Instead of thinking of how scared you are taken, looking at what
could go wrong. The worst thing that could happen is that she says no. And once
you look at that and figure out, okay, she could say no and how do you feel
about that? And then analyzing your feelings and depending on, you know, how
long you’ve been interested in this person. It could be, you know, it just may
sting you know, like staying a little bit like a, you know, a mild rejection or
if you know, you’re like me, and you pine for the girl for a long time like I
did for some girls when I was in college.

Dave:                                    04:16                     Then
you know, when you finally got up the courage to ask them out, it was, you
know, a little bit devastating when they turned you down. But if you look
through those aspects and figure out how you’re going to feel about it, it
helps you overcome the fear of actually doing the thing that that you want to
do. And when you think about investing, this is a fantastic way of looking at
investments and thinking about not only pulling the trigger on buying a company
but also when you’re doing the analysis of the company. So if you’re brand new
to investing, one of the biggest fears is I’m going to lose my money and
inversion. When we’re talking about aversion, one of the biggest ways to be a
great investor is to avoid who is in money. And when you’re thinking about
investing, a great way to look at something like this is to think about
something like investing in the latest shiny new thing.

Different worlds business challenge concept as a global trade meeting between two people from different hemispheres coming together as a surreal idea with 3D illustration elements.

Dave:                                    05:13                     Whether
that could be bitcoin or it could be a cryptocurrency, or it could be the
marijuana stocks that are all the rage lately. Any of those kinds of things
that have this really shiny thing are certainly unknowns. Is there potential
for great wealth and involved those? Of course, there is, but there’s also a
lot of risks, a ton of risk. And some would say maybe an outsize portion of
risk versus what you could gain. And when you’re getting involved in something
like that, Andrew and I probably would like to argue that what you’re doing is
you’re gambling, and when you gamble, then you have a greater size proportion
of losing your money risking your money. So if you go to the blackjack table in
Vegas and you are not an experienced card player, and you put all your money
in, there’s a real good chance you’re going to lose all of it.

Dave:                                    06:04                     And
the same thing can happen when you’re an investing. And so when you start to
get into investing, and if you’re listening to our show, one of the things,
your reasons why you’re doing that is because you want to learn more. So you
feel more comfortable about pulling that trigger. And when you’re thinking
about inversion, you’re thinking about what are the possible worst things that
could happen if I’ve saved up all of my life savings and I put it into stock a,
and it goes bad, and I lose all my money. That’s a horrible outcome. And that’s
something you want to avoid. So how do you avoid that? The way to, to avoid
that is working at more time, tested more principles and guidelines that are
set, not necessarily in stone, but are set up for success. And looking at guys
like the people we talk about, Warren Buffet, Charlie Munger, Monish Pabrai,
Ray Dalio is on and on and on.

Dave:                                    07:00                     There’s
just so many people you could talk about that have been successful using the
principles that Andrew, Andrew, and I talk about on our show. And so using
those, so inverting from, you know, buying the new shiny thing because it’s new
and shiny and everybody’s excited about it and looking at buying something a
lot more mundane like Hormel or Johnson and Johnson or something like that,
which is far from exciting. But those are the kinds of things that are going to
make you wealthy over time because of the dividends and because of the great
company that it is that it’s going to continue to grow and build earnings and
all those great things that Andrew and I talk about. But those are the ways
that you can use, this is a brief way that you could use in version two, avoid
losing money in the stock because one of the best ways to make money in the
stock market, to not lose it, because that’s going to be the biggest buzzkill a
for you to ever invest again.

Dave:                                    07:58                     And
B, to not continue to try to, to learn and grow from making a mistake. And it
doesn’t mean that we’re all not going to make mistakes. Andrew and I, we’re
going to talk a little bit about some other things here in a few minutes about
mistakes that I made and I’m going to talk about that and why I did what I did
and why I got out of what I did. And those are all things that you can learn
from. And I think that this, this inversion thing is, it’s this type of
thinking is a great way to look at just about anything in their life. Whether
it’s your personal life, whether it’s investing, whether it’s work-related, you
know, thinking about all the things that you struggle with and trying to work
backward from the problem and figuring out what it is that could be the
solution. As opposed to looking at this is the problem; this is where I want to
go.

Dave:                                    08:47                     How
do I get there? Sometimes it’s easier to look at, this is where we are, how can
I get there from going back and trying to find the roadblocks that could be
hanging you up or preventing you from doing that. And I know I try to do this
in my work life as well. You know, beyond just when Andrew and I are doing,
when I look at my day job, I look at all the problems, and the struggles and
the frustrations that we have in the restaurant world and how do I work
backward from those and it, it can help a lot. You can have some great
breakthroughs, and you can have a lot of great ideas that can spring from
looking at things from a different point of view. You know, think about things
like you know, if you sit in the same seat every single day where you eat
lunch, sit at a different spot to go to a different table, sit down at a
different place. a, you may meet somebody new and B, you’re going to look at
things from a different aspect in a different point of view that can open up,
you know, so many other possibilities.

Dave:                                    09:44                     And
you know, our minds are, are an interesting animal. And when we look at things
a different way, it can certainly create different ideas and different paths
and different ideas of things that we can do with our lives. And you know,
Charlie Munger, when he first turned me on to this whole inversion thing, I
thought it was like, wow, this is, this is really interesting. And I started to
try to incorporate it in, in different aspects of my life. And it had, it has
helped. It has worked in my investing, it has worked in my personal life, and
there’s just lots of different ways that you can take this. And I’d be really
curious to see what Andrew has to say about this after I’ve been babbling for
the last 10 minutes or so.

Andrew:                              10:29                     I’m
really curious to hear about your mistakes coming up here because I remember
that we highlighted some of my mistakes. I can’t remember which episode that
was. And I also don’t remember if like how in-depth we got into your mistakes.
And now I feel like we’re balancing the scales a little bit, so that will be
fun. The thing I’ll say before you jump into those are at least one to your
point, like looking backward and, and thinking of inversion can be a fantastic
way. And like you said, not just for investing, but for so many different
avenues in life. The behavioral finance guy we interviewed in episode
109
, David Keller, he talked about how pilots use the principle of
inversion as part of their training. , I mentioned in one of the other previous
episodes, I believe it was episode one oh six, about how you can use inversion
when you’re at the gym with weightlifting. And also how I have used [inaudible]
version to try to limit my losses by using the value trap indicator. And
through the research I did on bankruptcies, I had an interesting conversation, a
week or two ago with a very successful entrepreneur who does in my area.

Andrew:                              11:54                     He’s
been doing it for decades and has seen, you know, seen business through
prosperity, through a thriving economy, also seen business during the tough
times and through the reception, the recession and had his business survived
through that. And I thought that was inspiring how he said, you know, first
off, like he’s got full-time employees and had the successful business and, and
seems like the, it seems like from an outside perspective like, okay, why would
somebody with a lot of money think this way? But what he said was when he went
to buy a house, he took, he, he took, he took an inverted look. He didn’t use
the word [inaudible], but basically what he did was he looked at, okay, where
my business to fail tomorrow and if I were receiving unemployment and working
some part-time job, would I still be able to afford this mortgage?

Andrew:                              12:55                     And
that’s how he figured out how he was, which house he was going to buy and ended
up buying that one. So you know, when you do that, I mean there’s, there are
different factors that go along with that. You can buy real estate, buy low,
sell high just like you would with stocks. But this can be a valuable tool for
really measuring risk tolerance, lining it all up, to, to help you have more
chances for success and going to that, that kind of casino metaphor, really
stacking the odds in your favor. Because while we can’t all, we can’t always
predict everything that happens in the future. But you can account for a lot of
things. And so you always hope for the best, but sometimes you want to plan for
the worst. And that can be so true with the stock market. And sometimes it’s
not always black and white or, or very clear.

Andrew:                              13:53                     And
sometimes you need to understand that not every stock pick is going to work
out. So as Dave said, you do not want to put everything in one stock, and you
see this particularly in the corporate world to where people make that, I mean,
even worse than being under diversified, they’re like double under diversified
where they solely by stock and the company that they’re working at. So now
we’re talking about if the company goes bankrupt, not only have you lost your
life savings, but you’ve also lost your job. So you see that in that case. So
what’s the logical inversion is you want to diversify. So that’s a big part of
inverting that and trying to limit losses. But you know, as a part of that
diversification, obviously, when you do make a losing stock pick, we’re all
going to do it. If you’re going to be in the stock market any, any length of
time. Even

Andrew:                              14:52                   Warren Buffett bought stock in the company
that went bankrupt. So these are the things that you want to consider. And as a
business kind of turns the other direction. Some of them recover, and those
make for fantastic value investing picks with the margin of safety and
everything. But sometimes the margin of safety doesn’t get closed because the
business flounders so bad. And I think Dave has recent one and Kinda stings
probably a little bit still that I would like to hear about. But sometimes you
just got to learn when to cut your losses and, there are different ways, and we
all have different ideas of doing that. And I would like to hear Dave, how, how
you kind of thought that through with your stock.

Dave:                                    15:42                     Okay,
so the company that we’re talking about is called GameStop, and it is a company
that sells video games. They do little more than that, but that’s the basis of
their business. And I invested in this company about two years ago, and I
bought in at around 20 some bucks a share. I don’t remember specifically now. I
don’t own the company anymore. I did sell out of it, about a year ago or so,
but I lost my shirt. , and it is gone even farther south since I got out of it.
, I felt like that it was incredibly undervalued, and I felt like that at the
time there was, they were trying to change the course of the company obviously
with the dual threat of Amazon a killing them as retail wise because people
obviously could go online and buy the physical game from Amazon just as well as
GameStop. There was also the double whammy of the streaming and being able to
download these games either onto your console or either or playing them through
a streaming service.

Dave:                                    17:05                     So
that has done, did a lot of damage to the company as well. And they were trying
to pivot off of that and work more on with trying to get whites offices with
streaming companies and we selling of the games and things of that nature. And
it just never really panned out. And it’s been a bit of a darling for value
investors off and on for the last few years just because it’s the classic
undervalued company that had a really good balance sheet, had a lot of good
things going for it financially. But the mote that it had eroded almost
completely. And it was kind of, I wouldn’t say it’s not titanic by any stretch
of the imagination, but it’s certainly was heading down a path that was maybe
not the best. And when I got involved with the company, I thought that they had
the opportunity to turn it around and I thought that they were going to be
doing those kinds of things.

Dave:                                    18:08                     They
still paid a fantastic dividend, the yield when I bought it was about over five
and a half, 6%. And at one point, I think it got up to almost eight or 9%. And
a lot of that had to do with the fact that the dividend had not been cut and
they were raising the dividend because they were still generating free cash
flow. And they had a lot of assets that we’re enabling them to stay afloat.
However, as the stock price continued to take a beating, then the yield went up
about that. So it was, it made it look more attractive than it was. And so
finally, when I decided to sell out of the company, it was because I just, I
felt like I saw the writing on the wall, the moves that they’re trying to make,
that we’re going to take the company in or in another direction.

Dave:                                    18:59                     We’re
not taking shape as fast or as well as they had hoped. And they just seemed to
be more and more pressure on them in regards to the way that the video gaming
business was being done by the consumer. And the more that you read, the more
that there were just less and fewer people getting involved in the actual units
themselves. That there was a lot more involvement in the streaming services.
I’m not a video gamer myself, so I can’t speak to that directly personally. But
some of the employees that I work with, some of the other friends that I have,
they’re more into this, were telling me those things as well. And just the
whole, the reselling of used games scenario was not coming to fruition. And I
just felt like I saw the writing on the wall. So I got out of the company about
a year ago and like I said, I lost a lot.

Dave:                                    19:53                     I
think I invested, I can’t remember the dollar amount, but I lost at least two-thirds
of what I invested. So it was, you know, not great. And the other aspect of it
too, now if you look at the latest news of the company, I was reading an
article on Seeking Alpha, and they are, somebody, posted some news about GameStop
on there, which caught my attention. , I just looked at the stock, and it’s now
trading at $4 and 23, I’m sorry, $4 and 32 cents as of today. And it dropped
off from about, Jeez, $10 a few days ago to now $4 and 32 cents. So, it took a
piling, and the reason why I took a pummeling is they cut their dividends and
they, the management has since I got out of the company, they have a new CEO,
they have a new CFO.

Dave:                                    20:51                     The
people that were in charge of the company all left a voluntarily. , to me, that
was a sign also that, hey, the things are not going well, this is not going
where we wanted to go. We’re going to get out now before the ship finally
sinks. And they don’t have any prospects for somebody to come in and buy him
out because the business model that they’re in is dying a horrible death. And
so they don’t have a lot of places to go with what they’re doing. The new
management, as I said, cut the dividend completely, which, investors hate to
see and that killed the stock. And then they announced that they’re
repurchasing shares, which was typical, it would be a good thing because the
company is so undervalued. But I think a lot of people took that negatively too
because they’re using that cash to buy back shares when they could probably be
trying to use it to either acquire more assets that could increase the business
or do other things with it.

Dave:                                    21:53                     So
all those things have made, you know, me glad that I’m out of the company, but
also illustrated that we make mistakes and you know, all the different reasons
why we buy into the company. Once they change, then we have to decide on why
we’re still in the company. And it also illustrates that my original thesis was
wrong that you know, I, I think I fell into the trap of, I fell all over the
company and so I was looking for reasons to love the company more. And I guess
the easiest way to say it is I started drinking the Koolaid, and I didn’t
realize that some of the things that they were saying if I had worked a little
more broadly at the video gaming market. I would have seen some of these things
on the horizon and would have been a lot more hesitant about investing in the
stock. So that’s a big reason why I got into the company. So that’s why that
was a mistake for me.

Announcer:                        22:55                     Hey
you, what’s the best way to get started in the market? Download Andrew’s free
Ebook at the stockmarketpdf.com
you won’t regret it.

Andrew:                              23:06                     I’m
like right there with you in a way. So I bought the game stop at the beginning
of 2017 at like 25, and I got out at like 18 just seven months later. I’m like,
I, I feel like I know a little bit more than the average person about the video
game industry cause both my brothers play video games. So I know like there’s a
huge shift and I’m sure people have heard of, why did I blank on it? My, my
daughter does the dances from it like at least once a week. , what’s that at
fortnight? Oh yeah. Fortnite yeah.

Andrew:                              23:46                     The
model behind Fortnite is it’s an online, online-only game and you don’t, from
what, from what I understand, you can have like a console, or I think a lot, most
people play on the computer. But then, the business model for them is not; they
make money on the games, which is historically how game stop has always made
their money. They, they either resell the games, or they give you like a dollar
if you turn in an old game, and they turn around and resell it for ten bucks or
them, they sell like a lot of their money was on people getting excited about
the new game. And then they would sell all these preorders and then deliver
those. And then you could also buy the consoles and all the accessories with
that. But for games like Fortnight and other games that paved the road for a fortnight,
it’s a free game to play, so you don’t have to pay anything for it.

Andrew:                              24:40                     And
then you kind of buy add-on as you play the game to decorate your character and
stuff. I’m pretty sure so like it’s, it’s, it’s a completely different business
model, and the game stops. Now the part of that at all and just very recently, I
want to say, I don’t know the exact timeline, but it hasn’t been very long, but
, Fortnite really took the mainstream and, and like became a part of popular
culture like nothing else, like no other video game ha ever has. And so that
doesn’t help GameStop either at all if they’re not. , if they’re not a part of
that. And if anything, the trend of the online free model has continued, and
there’s this new game called apex legends that’s, I’m taking what Fortnite had
and moving along with it. And so, yeah, I mean that’s tough. I like how you
were able to get out.

Andrew:                              25:43                     It
sounds like before the dividend was cut itself. So that’s good. I see the
writing on the wall is good, and sometimes like, I can’t remember where I heard
that or read this, but it might’ve been in a book, or I might’ve seen it
online, but it’s like you don’t know stock until you own it yourself like
something about having ownership of a stock. And then a big reason why I pushed
for beginners, especially to buy at least one share right away because once you
have a vested financial interest in the company, you start to pay a lot more
intention to it and it becomes very, very easy to learn about the parts of the
business model. And I think there’s even a big hedge fund guy who, who does
that, where he, he’ll buy, I’ll see a stock he likes, he’ll buy like a smaller
position and start to learn more and more about it. And then continue adding on
if he still feels bullish about why he originally felt bullish about the
company.

Andrew:                              26:46                     And
that can be like a great strategy to use too. So I guess, you know, take away
of the story from what I got from your GameStop tragedy. Try to try to keep an
open eye cause you did mention you drank the Koolaid, you kind of had some
confirmation bias going maybe where you filter out any negative news and then only
looked at the positive. But it sounds like you, you didn’t drink a completely,
and you kept in the open eye and once, once you finally realize the gravity of
the situation you got out. And I think you’re happy you got out when you did
versus possibly holding this thing to zero. Being a stock that’s traded under
$5 and now has the possibility of being removed from some of the major
exchanges so that could bring the stock down even further and push it into like
that dreaded penny stock range.

Andrew:                              27:45                     So,
who knows how it’s going to turn out, you know, you hope for shareholders and
people who work there, you hope that any business can be turned around. But
that’s tough to say. And you know, I think being some of the kind of away from
the situation, I would agree with you, and I think the dividend confirmation is
just, that’s like the nail in the coffin in my mind and sure that the company
maybe does a miracle story, but I think nine times out of 10 they don’t. And so
I, I’d, I would agree that anybody’s still holding on this would be a time to
get out before it gets even worse. Yup. For sure. I didn’t have an idea on the
inversion. I wanted to kind of throw out there before we signed off. Okay. , I
guess that it’s relevant to certain personalities, at least I think for me,
insert, I’m a weird cookie, so it’s like, maybe I’m not the best example, but
for me it’s like I have different, I have very different, very, very different
risk tolerances depending on what we’re talking about.

Andrew:                              28:57                     So
I’m, for whatever reason, I’ve always been very risk-averse when it comes to
the stock market versus other, activities in life where I’m very, let’s say
foolish. What you can do. And you can also use inversion is if you do a self
eval on yourself, you can maybe figure out that, hey, maybe I tend to focus on
all the negative. And so we’re having fears and using them version can help me
overcome fears. , another way you can do that is if you’re always like a
pessimistic person, you can maybe be inverted. And think of the positives, like
an example that popped into my head that that, TV show that you recommended to
me, Dave, the last kingdom on that flicks. Oh yeah. Yup. Which all I met to like
me, that was so slow for me, and I only continued watching it because you said
you were watching it, so I wanted to be in there with you. And then I finally
like got hooked. And once I did, there was a scene that I saw recently where a,
it’s this like a young kid, and he’s now the Keene, and he’s leading one of his
first battles. And he’s like, Oh, you know, this could be the hill where we die
— and then thinking of all the things that go wrong. And then the guy who’s
like the protagonist and he says, you know, the big warrior always winning all
these battles. He’s like, or we could win.

Andrew:                              30:29                     You’re
going to apply that. You can apply that to a lot of things. So it’s like if
you’re finding that maybe, you know, you fall more on the pessimistic side
rather than the greedy side, well maybe it’s a good idea for you to take the
inversion and think about, hey, I could win, or I can find success. Or you
know, I could be the investor who has a stock that takes off and, and becomes
that, that that big winner for me. And I’m not going to be the investor who
always loses to the market or you know, the person who tries to pick stocks.
And as a lot of people like to kind of look down on those type of investors.
You know, maybe flip it and be like, maybe I can be the person who can keep up
with the market or beat the market over a very long period.

Andrew:                              31:18                     I
mentioned, I think it was last week, and sometimes we get our schedules mixed
up, but I mentioned how you could get excited about dividend investing just by
seeing an example and seeing some real data. And I mentioned how you could, go
on different stocks, investor relations websites and sometimes they have a
calculator on there that shows kind of how their stock has done over the years.
There’s another, link that I like cause then you can type in any ticker, and
they can give you that calculation. You put in the ticker; you put in how much,
let’s say I invested 10,000, and then you put in, let’s say I invested 10,000
on this day and how much would it be worth today? And they have, I talked to
you about this. So Dave’s going to put this in the show notes so you can use
that link for yourself.

Andrew:                              32:10                     And
I’m not going to try to read it cause it’s kind of long and it’d be impossible
to remember. But you can go on the investing for beginners.com and look for IFB
what the episodes are one, one, three. You can put that in the search bar, and
you should get the show notes on there where you can find the link to this
tool. , so I used it for some, some big names, right? Coca-Cola, one that
buffet bought the way, way back and it’s been one his best stock picks. I, I
saw a stat very recently where Buffet’s getting over $500 million per year in
dividends from his investment in Coca-Cola that he made in the eighties slash
nineties. So crazy, right? So I put in, let’s say you put $10,000 into
Coca-Cola and that was it. And you bought it for the years from today, like for
the years back. So that’d be 1979, excuse me.

Andrew:                              33:09                     So
that $10,000 with reinvested dividends, that’s key because it’s the reinvesting
dividends and picking up the extra shares that provide such a big portion of the
return, especially as you zoom out over a very, very big period. That and talk
about a very, very big return. $10,000 would become $20 million for an average
annual return of 20, almost 21% I put it in a couple of other tickers in there,
just like big kind of household names that would have been great investments. ,
decades ago you put it in proctor and gamble, ticker symbol, PG $10,000 would
become $24 million at the 21.5% annual return. And I wanted to say one more
Walmart, $10,000 put in 1979 today would be 26 million, $444,000 for an annual
return of over 21%. So you know, our, these are these names that are, you know,
big names that you would have had to, were they big tech names?

Andrew:                              34:18                     Nowhere
they name that only s you know, top-secret investors with them known? No, I
think a lot of people would see Walmart stores or drink coca-cola products or
have proctor and gamble products in, in their bathroom. Look at, look at, some
of them, the bathroom products you use and the brand might be one thing, but it
might say own the, buy a Parker and gamble on the label., you know, bet. Try it;
check it out. So that’s the exciting thing that can happen. And I’m talking
about a one-time investment, you know, maybe it’s not $10,000. Maybe it’s, let
me, let me put it in. , the calculator, right? Maybe it’s $150, and we look at
that for the year — even something small like $150, that turns into 34,000.
Well, I’m sorry, $394,000 if it’s compounding that 21% a year.

Andrew:                              35:16                     So
that’s why I say you don’t need every stock pick to be a winner. You could have
just one that you know, blows everything out of the water and gives you not
maybe $500 million in dividends every year, but maybe it’s, I don’t know,
$1,000 in dividends every year. Maybe it’s 10,000; maybe it’s 100,000, maybe it
funds your right. So just if, if you’re the of the type of personality who’s
very risk-averse to the point where maybe you don’t get excited enough to want
to risk money in the stock market, well maybe use the inversion principle to
kind of flip that on its head and learn more about dividend investing. Learn
more about why Andrew gets so crazy about dividend reinvestment and do some of
these exercises for yourself. And maybe if you are like you kind of know, hey,
I get excited with these stocks.

Andrew:                              36:10                     I’m
always thinking that I’m going to double my money in, in the week. Or I’m
always kind of really, have this exhilarating feeling when I’m buying these
stocks. And maybe you fall more on the greed side. , it could be very
beneficial for you, the rain things back and, and invert. And think, well maybe
I should have some better risk management. So I think there are so many
different ways you can use inversion as a powerful tool. I think it becomes one
of those principles kind of similar to, the tortoise and the hare be very
patient where it’s just like smart wisdom that’s been passed down through the
generations. I think it’s clear when, when you talk about some of the big
names, they have talked about Marcus or a Seneca, I’m that mathematician guy.
These are a thing; this is a principle that’s really, that’s survived through
generations as well. And so there’s a lot that we can learn from it and apply
and use it to get real results in our life. And so I think it’s, it’s worth
really learning and understanding and trying to implement in their own lives.
Well said.

Dave:                                    37:21                     All
right folks, we’ll, that is going to wrap up our discussion on inversion today.
Thank you for listening and hope you enjoyed our conversation, and you picked a
finger or two out there that can help you with your life as well as your
investing. I will go ahead and put all the links that we talked about today in
the show notes, to the article, to the calculators that Andrew was talking
about, as well as some of the past podcasts that we referenced as well. So
without any further ado, you guys go out there and invest with a margin of
safety emphasis on the safety. Have a great week, and we’ll talk to y’all next
week.

Announcer:                        37:53                     We
hope you enjoyed this content. Seven steps to understanding the stock market
shows you precisely how to break down the numbers in an engaging and readable
way with real-life examples. Get access today at stockmarketpdf.com
until next time. Have a prosperous day.

Announcer:                        38:18                     The
information contained just for general information and educational purposes
only. It is not intended for a substitute for legal, commercial and or
financial advice from a licensed professional. Review. Our full
disclaimer@eeinvestingforbeginners.com.

The post IFB113: Charlie Munger’s “Invert, always Invert” appeared first on Investing for Beginners 101.

Aug 01 2019
38 mins
Play

Rank #5: IFB92: A Refresher Episode on Some Investing Basics

Podcast cover
Read more

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave, too decode industry jargon, silence crippling confusion and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now. Dave:                                    00:35                     All right folks, well […]

The post IFB92: A Refresher Episode on Some Investing Basics appeared first on Investing for Beginners 101.

Feb 28 2019
29 mins
Play

Rank #6: IFB85: Finding Good Dividend Stocks By Using Better Ratios

Podcast cover
Read more

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:34                     All right […]

The post IFB85: Finding Good Dividend Stocks By Using Better Ratios appeared first on Investing for Beginners 101.

Jan 02 2019
38 mins
Play

Rank #7: IFB55: The Worst Money Advice that Beginners Always Hear

Podcast cover
Read more

Welcome to episode 55 of the Investing for Beginners podcast.  Tonight Andrew and I are going to discuss some of the worst money advice you can get. Invest 10% of your income Investing in a quick fad to make money quickly Try to get to cute and taking on more complexity just for the sake […]

The post IFB55: The Worst Money Advice that Beginners Always Hear appeared first on Investing for Beginners 101.

Apr 11 2018
31 mins
Play

Rank #8: IFB64: Personal Finance 105: Maximizing Passive Income

Podcast cover
Read more

  Welcome to Investing for Beginners podcast this is episode 64. Tonight we’re going to conclude our series on personal finance, this is episode 105 of our little series here. Andrew’s going to start us off we’re going to talk a little bit of passive income so Andrew go ahead and take it away. Andrew: […]

The post IFB64: Personal Finance 105: Maximizing Passive Income appeared first on Investing for Beginners 101.

Jul 06 2018
30 mins
Play

Rank #9: IFB97: A List of Really Unwise Financial Decisions

Podcast cover
Read more

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginning led by Andrew Sather and Dave Ahern. To decode industry jargon. Silence crippling confusion and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now. Dave:                                    00:36                     All right […]

The post IFB97: A List of Really Unwise Financial Decisions appeared first on Investing for Beginners 101.

Apr 04 2019
33 mins
Play

Rank #10: IFB23: Warren Buffett Investment Advice to the Average Investor

Podcast cover
Read more

Welcome to session 23 of the Investing for Beginners podcast. I am Dave Ahern and I am joined by my co-host Andrew Sather. In today’s session we are going to discuss some quotes from the great Warren Buffett. Buffett is arguably the greatest investor of our generation, possibly ever and he has been a fountain […]

The post IFB23: Warren Buffett Investment Advice to the Average Investor appeared first on Investing for Beginners 101.

Jul 22 2017
41 mins
Play

Rank #11: IFB91: Buying Bank Stocks and Marijuana ETFs

Podcast cover
Read more

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:35                     Welcome to Investing for […]

The post IFB91: Buying Bank Stocks and Marijuana ETFs appeared first on Investing for Beginners 101.

Feb 21 2019
45 mins
Play

Rank #12: IFB52: The Art of Finding Undervalued Stocks

Podcast cover
Read more

Alright, folks well welcome to Investing for Beginners podcast. This is episode 52 Andrew and I are going to talk about balancing the art and science of intrinsic value. Today we’re going to talk a little bit about intrinsic value, one of my favorite subjects and Andrew’s as well and this should be a little […]

The post IFB52: The Art of Finding Undervalued Stocks appeared first on Investing for Beginners 101.

Mar 15 2018
29 mins
Play

Rank #13: IFB11: A Complete Guide to to the Most Useful Stock Valuation Methods

Podcast cover
Read more

Today we are going to talk about stock valuation methods. Andrew has a great ebook that he wrote a while back that talks a lot about how to value a stock. These are methods that I use personally every day . A breakdown of the 7 valuation metrics that we use P/E ratio and its […]

The post IFB11: A Complete Guide to to the Most Useful Stock Valuation Methods appeared first on Investing for Beginners 101.

Apr 12 2017
1 hour 3 mins
Play

Rank #14: IFB44: Back to the Basics Pt 2: Share Dilution on Wall Street

Podcast cover
Read more

This is part 2 of the 5 episode “Back to the Basics” series from The Investing for Beginners Podcast. Each episode covers the fundamentals of the stock market and investing to provide a solid foundation for those who are looking to compound their wealth over time. Here are the links to each of the episodes: Back […]

The post IFB44: Back to the Basics Pt 2: Share Dilution on Wall Street appeared first on Investing for Beginners 101.

Dec 29 2017
35 mins
Play

Rank #15: IFB02: Why Timing the Market Wrong Doesn’t Matter that Much

Podcast cover
Read more

One of the scariest things about investing is buying a stock at the absolute wrong time. Guess what? Timing the market wrong doesn’t matter that much. What is much more important is the time in the market. You read about all the stock market millionaires. Or billionaires. Guess what they all in common? It’s time […]

The post IFB02: Why Timing the Market Wrong Doesn’t Matter that Much appeared first on Investing for Beginners 101.

Mar 01 2017
42 mins
Play

Rank #16: IFB32: An Example Buy and Sell Stock Checklist

Podcast cover
Read more

Welcome to investing for beginners podcast I’m David Ahern, and Andrew Sather is here with us tonight. We’re going to talk about investing checklists; we’re going to talk a little bit about when to use checklists and how they can help you when you make buying stock decisions as well as selling stock decisions. Checklists […]

The post IFB32: An Example Buy and Sell Stock Checklist appeared first on Investing for Beginners 101.

Sep 29 2017
48 mins
Play

Rank #17: IFB87: Buying Stocks in a Downtrend, Selecting From a List of Stocks

Podcast cover
Read more

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts. Now. Dave:                                    00:33                     All folks, we’ll work […]

The post IFB87: Buying Stocks in a Downtrend, Selecting From a List of Stocks appeared first on Investing for Beginners 101.

Jan 17 2019
38 mins
Play

Rank #18: IFB45: Back to the Basics Pt 3: Stocks vs Other Investments

Podcast cover
Read more

This is part 3 of the 5 episode “Back to the Basics” series from The Investing for Beginners Podcast. Each episode covers the fundamentals of the stock market and investing to provide a solid foundation for those who are looking to compound their wealth over time. Here are the links to each of the episodes: Back […]

The post IFB45: Back to the Basics Pt 3: Stocks vs Other Investments appeared first on Investing for Beginners 101.

Jan 15 2018
48 mins
Play

Rank #19: IFB27: 6 Unconventional Investing Principles for Beginners

Podcast cover
Read more

  Welcome to episode 27 of the Investing for Beginners podcast. In today’s show, we will be discussing six unconventional investing principles. These are ideas that Andrew has come up with that help you with some of the more difficult emotions related to investing. These ideas are sometimes hard to implement, but when you are […]

The post IFB27: 6 Unconventional Investing Principles for Beginners appeared first on Investing for Beginners 101.

Aug 19 2017
45 mins
Play

Rank #20: IFB105: Q&A: Is Acorns Worth it? Should I Buy Small Cap Stocks?

Podcast cover
Read more

Announcer:                        00:00                     You’re
tuned in to the Investing for Beginners podcast. Finally, step by step premium
investment guidance for beginners led by Andrew Sather and Dave Ahern. To
decode industry jargon, silence crippling confusion and help you overcome
emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:37                     All
right folks, welcome to Investing for Beginners podcast. This is episode 105,
tonight. Andrew and I are going to read some listener questions and we’ll go
ahead to answer those on the air and we’ll have our usual banter and witty,
witty comments from each other as we go forward with all this. So I’m going to
go ahead and read the first question. Andrew, would you like to say hello?

Andrew:                              00:58                     Hello.

Dave:                                    01:00                     Excellent.
Good job. All right, moving on. Hello. I have been following your podcast for
months and just recently signed up for your service. I noticed you’re using
your Roth IRA for your stock recommendations and tracking your 40 year
portfolio. I understand the benefits of using a Roth to avoid taxes but is
absolutely unnecessary for the goal of your slash our investing. My Roth is
being utilized with an advisor service from vanguard. So it was not available
for individual stocks. I’m using a separate, separate taxable brokerage account
for my stock picking. Would this still be beneficial in the long run with
having to pay taxes yearly on dividends and capital gains are selling if in a
taxable brokerage? Thank you Jared. Andrew, what are your thoughts on this?

Andrew:                              01:43                     So
we were kind of talking about this off the air before I’m heading record. I
think like, like what you mentioned Dave, obviously, um, you can have multiple
Ross, so he talks about how he has an advisor who’s handling one of his, you
know, his Roth account. You can open a second one and use that for your stock
picking instead of doing it with a taxable brokerage account. So just as a
quick overview refresher, maybe if you’re not well versed in all this stuff,
the individual brokerage account, um, it gets taxed. And so like he said in the
question, you get taxed on dividends, you get tax on capital gains. What’s key
to understand is even if you’re doing a drip, like a dividend reinvestment,
you’re still going to get tax on those dividends. So let’s say you’re
reinvesting all of your dividends and the given year, let’s say you had like
$1,000 in dividends and you invested all of them, um, you’re still going to get
a bill come tax time.

Andrew:                              02:41                     So
you should have some money saved to pay for those taxes on those dividends you
received. Obviously we like to take advantage of all the tax shelters we can as
investors. And so that’s why a Roth IRA or a regular IRA is something that we
from the onset recommend you can go back to our personal finance series and and
hear all about that. But you know, with a Roth, they’re not going to tax you on
those dividends. So as an example, if I’m getting $200 in dividends this year
for my Roth a, I’m not going to get taxed on any of that so I don’t have to
save any money and I can just reinvest those dividends and let that grow over
time. Now we’ll say one way to mitigate this. So obviously you can open the
second Roth that kind of solves that problem. Uh, another reason why somebody
might not be able to use a Roth is there’s income limits on Roth.

Andrew:                              03:37                     So
if you make a certain amount of money, um, obviously you’re fortunate, but
you’re not able to take advantage of some of the tax shelters like a Roth,
particularly if you make a lot a lot of money. So what you can do instead is
instead of, instead of like reinvesting your whole portfolio, you can maybe
let’s say pick half of your stocks to, to do a drip and then automatic
reinvestment and maybe the other half you’re going to collect those dividends
and let them sit. And then you can, um, have, have a cash balance and you can
take that out when tax time happens and use that to pay your taxes. Um, so, so
you can do some calculations on that. You can be clever and smart, however you
want to do that. You can set your whole account to not ran best and then just
kind of reinvest manually, right?

Andrew:                              04:27                     So
you have a pile of, of, of, of cash from your dividends and you buy more stocks
manually instead of having them do automatically. And again, you can be smart
with calculations and make sure you don’t buy too much stock so you have enough
for taxes. So those are all kind of options we can do. Um, because my eli there
does a Roth Ira, I don’t have to worry about taxes. And so those decisions and
those stocks, elections are happening in that environment, in that context. So
that also would like, because a tax benefit buying and holding a stock for a long,
long time as a tax benefit in theory in my Roth, you know, I could be trading
in and out and not have to pay any capital gains taxes. And so that could
encourage trading activity. Obviously. Um, I like to hold longer in spite of
that. But, um, that’s another way to mitigate taxes is at least not on the
dividend side, but on the capital gain side. Um, well I think Warren Buffet,
some of these, some investor quoted how that’s one of the best, the most tax
efficient things to do is just to hold your stocks because you’re not having to
pay capital gains tax every time you sell. So that’s another kind of idea or
strategy you can take if you’re in the fortunate position to have so much money
that you can’t have these Roth contributions.

Dave:                                    06:01                     That
was an excellent answer and I guess the only thing that I would tag on with
what Andrew was saying was just to kind of I guess double tap they the the
hammer on the reducing the taxes. You have to think of taxes as something we
all have to pay obviously and we can get into all the different ramifications
of that and we won’t because that’s not our kind of show. But anything that’s
going to reduce how much you can reinvest into your wealth for your future is
going to have an impact in the long run. And so if you’re paying taxes yearly
on dividends that you’re going to reinvest back into the company, that will
affect the long term compounding because you’re going to be reducing the amount
that you’re actually putting into the account to reinvest. And so that’s why I
would recommend that you investigate other options to help you reduce the impact
that taxes can have on your investments.

Dave:                                    06:58                     Because
regardless of whether you’re a 29 or 49 when we’re investing, we want a long
time horizon because that’s how we’re going to build the wealth is not by
hitting a home run, by picking Amazon when it first comes out as $12 a share
and now it’s you know, a couple thousand or whatever it is. It’s, it’s by
having you know, gradual compounding interest over a long period of time and
just continuing to grow as Andrew likes to say, continue to grow, all those
streams of income and anything that’s going to interrupt that or impede that is
something that you want to try to avoid if at all possible because it will have
an impact. Even if it’s, you know, the taxes maybe knocks off half a percent of
what you’re reinvesting, that’s a half a percent. You can’t have to invest so
it’s, you know, it behooves you to run, not walk to find what the options would
be to help you reduce that if any way possible. I love hearing something I
wrote in the daily email earlier and here your reference now on the podcast
today. That was great. I told you I do read them. All right, well why don’t we
move onto the next question. Okay. So, hi Andrew. I’ve been following your
stuff for a couple of weeks now and just purchase the value type indicator.
Buck was spreadsheet.

Andrew:                              08:15                     I’m
really enjoying the material and easy to understand the answer you’re making
everything. I had a question about market cap and picking stocks. I’m from
Australia, so I assumed our small, mid and large cap stocks would be of
different value to America. However, I seem to get the same valuations when I
do a search with MCAP being anything over 2 billion. I want to know the
potential downside to buying small cap stocks. I’ve ran a screen in a found a
few small cap stocks in Australia that massive ETF for by, but I wasn’t sure
about executing because they’re small cap. Look forward to your response.
Nicholas, what’s your thoughts?

Dave:                                    08:48                     My
thoughts are to try to avoid small cap stocks if you can, for one very, very
large reason, volatility, when you’re dealing with small cap stocks, you’re
going to deal with a great ton more volatility than you will with mid or even
large cap, especially just because of the nature of how the market works. Small
cap stocks can have a large amount of volatility based on the good news or bad
news that happens with the stock market. And because they’re so small that
there can be wild fluctuations in the price and as a longterm investor, you
want something that’s going to be calmer and just generally go up. But small
cap stocks can rush up really, really fast because they’re the fat of the day.
And then all of a sudden some, a bit of bad news comes out. Everybody pulls
their money out and it crashes like a bomb. And that’s how you can lose a lot
of money in the stock market is by playing in that field. Uh, if that’s
something that you could comfortable with the risk of dealing with that and,
and the stress of seeing those things go up and down and up and down, up and
down, then maybe that’s something do you want to consider. But for me
personally, that, that is a big reason why I steer clear of small cap stocks.
Andrew, what are your thoughts?

Andrew:                              10:07                     Yeah,
I agree. Um, I think we should be clear to the way people define small cap is
going to be different. So some websites will say a small cap stock is from the
2 billion to $20 billion range, which I love buying those. Some websites will
call small cap stocks under $2 billion, which is a what Nicholas was referring
to here. And I think Finn is CAC categorizes it the same way. Uh, and those are
the ones that I would avoid. The reasons why I think that there’s so much
volatility with the stocks. If we think about fundamentally why they are that
size, you’ll have a, a few things in a few factors to consider. So when a stock
is that size, generally it’s because the industry hasn’t matured as much. And
so you might have, it could be one of two things or both. Really. You could
have, um, a lot of players and the in the market where not one as has been
dominant.

Andrew:                              11:11                     So
instead of like the soda industry where there’s Pepsi, Coke and Dr Pepper and
um, and those are like the three kind of pillars of the industry. It could be a
small industry where there’s like hundreds of players. It’s a, it’s in a very
growth stage. The industry itself. I, I think of marijuana when I, when I think
about an industry like that and so, so many, some of these small companies, so
much competition, such a young industry. And so there’s going to be blood to,
to, to um, finally reach a point where it’s more mature and there’s more stable
players in there. Um, so it could be one of those two things, right? It could
be a young industry or there be just so many players or it could just be a
very, very small player in the bigger field. And so I think whether it’s any of
those reasons, it’s not something that I would be comfortable buying.

Andrew:                              12:04                     There’s
plenty of opportunities with stable companies. Like Dave was saying, a lot less
volatility, not only in the stock price but also in the financials. And so why
play lottery tickets when you can, you can go for something that’s a little bit
more established in a little bit more safer. And another thing to consider too
is I think you can have a lot more, not funny business, but like factors that
you don’t really have to consider with really big companies. So I don’t know
how many people know this, but when Warren Buffet was starting out, he was a
very activist type investors. So if you think about those types of investors
today, I think of like Bill Ackman, um, couple other names are escaping me at
the moment, but basically these, these big investors who will, who will buy up
large portions of a, of a company and then kind of use that power to make
decisions themselves on how they want the company to go.

Andrew:                              13:08                     So
that could be good or bad depending on the activist investor. So if the
investor is kind of seems like a value opportunity and they want to close on
that and then they want to get out of that position, once that value has been
realized, then if you’re the type who really is trying to buy the stocks for
the very long term, that might not work out for you. If they’re an activist
investor who’s maybe trying to keep a long term stake, maybe that’s, that is
good for you. So you can’t really know. But it’s the smaller market cap type
stocks where there’ll be more likely to have a big player come in and kind of,
they could change the whole story of the company within, you know, a few
months. And so you don’t tend to see that with the larger market cap stocks because
there’s not many people with billions of dollars laying around that can just go
into these huge public corporations and just kind of demand their way. So those
are all, I think additional reasons and factors and fundamentals to consider
when it comes to these small cap stocks. Um, like I said, I don’t, I, I’ve,
I’ve dipped in into like the 1 billion to $2 billion range and I, and sometimes
I’ll buy into those still, but definitely anything under 1 billion is, is no go
for me. And generally I try to stay above 2 billion in market cap.

Speaker 1:                           14:33                     Hey you, what’s the best way to get started in the market? Download Andrew’s free Ebook at stockmarketpdf.com you won’t regret it.

Dave:                                    14:46                     Excellent.
Good answer. All right, let’s move on to the question.

Dave:                                    14:52                     Good
morning, Mr Sather. Thank you for this peek into the growth of a dollar. Very
informative and detailed explanation of compounding interest and growth. Out of
curiosity, do you use at all use apps like acorns or Robin Hood and what is
your opinion on their viability as investment vehicles and do you happen to
know if there is a way to set up a drip on there? I apologize if you’ve already
answered this question in the podcast, but I haven’t gotten there yet. I
recently started at a small Robinhood investing account to force myself to pay
attention to the market more than occasionally reading my quarterly 401k
statements. Thank you very much for guidance making the vast world of than
investing a little bit smaller for me. Best regards, Ryan,

Andrew:                              15:33                     I
love that he’s, you know, it’s something I’ve talked about over and over again
and I talked about it a lot when I first started. The blog is just get started,
right? Just get your toes in the water and just, there’s something about having
ownership in the stock that makes you look at the stock market different. It
makes you pay attention even if it’s just like a couple dollars. Um, there’s
something about having that ownership that really changes things and I think it
accelerates your learning process. So I love that. Even though we’re not too
fond of Robinhood. I love that he made one just so he could pay attention to
the market. And it sounds like it’s working out for him as far as like thoughts
on Robin Hood, other than us saying that, hey, we’re, we’re not, we’re not big
fans of it. I would say you can go back in the archives and listen to week
dedicated a whole episode two, um, it’s not coming up on my search here, but I
do have a blog post on Robin hood. If you go on the blog, a investing for
beginners.com you go into the search bar and you type in Robin Hood, uh, you
can read thoughts on there. They don’t offer drip as of now this recording in
the middle of 2019. So keep that in mind as far as acorn. So I’ve used acorns
in the past, but just very sparingly. So the way acorns works is it’s this app
that you can download, it’s totally free, you can hook it up to your bank
account and then basically it’s like a keep the change, but for investing. So
if I buy a candy bar for a dollar 75, um, they round up the change up to the
next dollar amount and then they take that money and they invest it for you.

Andrew:                              17:17                     So,
you know, that candy bar we’ll take, instead of a dollar 75, I’ll take a $2
debit out of my account and those 25 cents will go into your acorns account. So
it’s, I think it’s a cool way that gets started and it’s, it’s a very visually
appealing platform. It’s very aesthetic, um, fun to look at. Uh, and that’s
kind of cool to see that growth of your portfolio over time and you know, it’s,
it’s something that’s automated, so that can be useful. I, I think it can be a
cool thing, but it’s, uh, the, the way I’ll say it like this, like it would be
like, it should not replace a good standard and lesson plan. Something like
what we talk about with a $150 a month. The progress you’ll make on that is
very, very slow unless your, um, a huge spender, which if you’re trying to
build wealth that’s probably hurting you.

Andrew:                              18:21                     So
you might think, oh, well my, now my good spending, you know, all this big
spending them doing is helping my wealth as thought it. That’s going to be
fractions of, of savings versus if you would have actually just save the money
and investigate yourself. So I think it’s a variety of like credit card
rewards. Um, you can, there’s people that certainly are good with them and you
can kind of use that to your advantage to get nice little boosts here or there.
But in the grand scheme of things, we’re talking about little small percentages
versus La. Um, you know, we’re, we’re talking on different scales. So one to 2%
versus 100% you know, uh, is a credit card rewards making you spend an extra
$200 because you think the extra $2 is going to be free to you. You’re talking
about 1% of if fuel just save the $200.

Andrew:                              19:16                     Now
that’s I hope you get where I’m going with this. So acorns is cool. The way
they do is they will give you like a portfolio of ETFs and um, you can choose
your risk tolerance. They go conservative, moderately conservative mother. It
my lady aggressive and aggressive and they’re going to large, large cap stocks,
small cap stocks and, and just like a mix. I just remember the, the performance
for it in the time when I had it and I was checking the performance. It was
terrible. And definitely investing on my own had much better results. Not to
mention the fact that you cannot really drip as far as I’m aware. And even if
you are dripping, you’re not, that they’re buying fractional shares for you and
in these huge, large portions of these, different ETFs that they’re getting you
into. So you’re talking about fractions of fractions, of shares of it. It’s
just you’re spreading your money so thin and it’s kind of dumb. So I, I just, I
would say it’s a cool thing to have, but I would definitely not use it as a
main, um, vehicle for saving for your retirement, saving for your future or
thinking that you’re building any sort of wealth with the, it’s, it’s, it’s not
really gonna do much.

Dave:                                    20:42                     I
like the answer that was, I think that was good. I, uh, I personally don’t use
acorns or Robin Hood and I Kinda, I guess my thoughts are very similar to Erin
to Andrew, so I don’t really have anything to add to that. All right, I’ll do
that. I’ll do one more question here. Okay. Uh, Mr Sather. I haven’t been
following your news on there for a couple of months now and really enjoy
reading your email leathers. I have another question asks you about investing.
I understand value investing in that as your niche investing style. However,
have you ever thought about monthly dividend stocks? I’ve listened to all your
podcasts from past to present one of them ever talk about monthly dividend
stocks. Who would be nice to hear your thoughts on them? It would also be nice
to know a few have ever invest your money into any of them. Hope the best for
you and your family and all your future endeavors. Thank you Robert.

Dave:                                    21:32                     I
would like to hear your thoughts on that, Andrew, cause I be honest with you, I
don’t know much about monthly dividend stocks and since you’re the, you’re the,
you, the drip king, I think that would be appropriate for you.

Andrew:                              21:43                     So
they definitely exist. Um, you can go on Google and you can find the list quite
easily of monthly dividend stocks. So I get the appeal of it. You know, you’re,
you have an income stream every month. So if you picture your somebody who’s
close to retirement or actually in retirement, I think that’s where the draw is
for a lot of people because they can kind of replace a paycheck as you’re
getting these, these um, these checks, these dividend checks to you every month
and it’s consistent, reliable. So that’s a cool feature. I wouldn’t buy a stock
just because of that. You can kind of structure your portfolio to hit a lot of
months or you could even effectively have it do the same.

Andrew:                              22:30                     I
think just based on one of experience, I’ll get my dividends and waves. So I
wish I looked this up before we were recording, but I think there’s a big, the
way that these companies do their fiscal years, a lot of them tend to follow
the same thing. And then a lot of, a lot of other companies will kind, Kinda do
their fiscal year however they want. So they tend to pay dividends based on how
their fiscal year schedule is. So I think it’s like the February may, um, every
three months, like on that track kind of is a very common monthly dividend
payout. So why you could build a portfolio based off of it? Um, it might be
harder just because there is that one or two common, um, fiscal year structures
that a lot of companies use. I would say, yeah, I get the draw of it. I, I get
the idea that you want this consistent, reliable, um, easy to play him for
income stream.

Andrew:                              23:34                     But
I think the potential cons outweigh the potential benefits. You have to
remember you’re, you’re doing these investments because you’re buying part
ownership of a company. So the way I would see it as like, would you take, uh,
a job that’s either lower pain or a job that just pisses you off because you
get paid every week versus once a month? I certainly wouldn’t. And so I
wouldn’t buy stocks in the same way because of all those reasons. So you
should, if you’re planning to live off dividend income, you should structure
your budgets. So you’re taking all of the dividend payouts and consideration.
One of the stocks, that’s one of my favorites is Disney and they pay one,
they’d do it biannually. So there’s only two dividend pay out payments and it’s
a two times a year. So if you’re planning to live off dividends, you should
take the whole portfolio into account and just try to budget for and make sure
that the months where you’re not getting dividends you have, you have enough
saved to cover those months. But yeah, kind of going back to the original
question, I wouldn’t not buy them, but I haven’t found one yet that I wanted to
buy and so I just haven’t bought one yet.

Dave:                                    24:50                     That
was very interesting. I think one of the things that, I guess I would wonder
about a company that’s doing a monthly dividend stock, um, are they, do they
have like kinda higher payout ratios than normal companies and aren’t they kind
of generally smaller cap stocks that are going to be doing this or are they
larger cap stocks?

Andrew:                              25:15                     That’s
a good question too. I, so I guess you know, there’s only so many earnings you
can pay out, right? So whether the payout ratio is higher or not, I would
imagine the parish are probably is higher. I think I’m like the MLPs master
limited partnerships tend to, some of them tend to do monthly. So now, now that
actually you mentioned it. Yeah, I did buy one of those in the past and then
perform, you know, and it wasn’t like a, a much better stock from an income or performance
perspective than, than any other stock I bought. Um, so yeah, I guess something
to keep in mind too is that if they’re going to pay you monthly, it’s going to
be a much lower dividend than the standard quarterly would be.

Dave:                                    26:02                     Yeah,
that makes sense. And I guess you’re kind of exploring that a little bit more
if they have a higher payout ratio, that means for those of you who don’t
understand what I’m talking about, what were we talking about? A payout ratio.
We’re talking about the money that the company is taking from their earnings
and using that to pay out a dividend as opposed to share buybacks or
reinvesting back in the company or just simply sitting on the money. And so the
higher the payout ratio, that basically means if you have $100 in your account
and you’re taking $80 of a two pay dividends, that we joined $20 to do anything
else. And so the higher the payout ratio, generally there’s less margin for
error. And I’ll obviously when we’re talking about this, there’s going to be
exceptions to the rule and a company that springs to mind when I think about
that as somebody like Coca Cola, uh, who’s been around for about a hundred
thousand years and is very likely not going anywhere anytime soon and they have
a elevated payout ratio, but they’re also at a stage where there are companies
really kind of beyond growling at this point.

Dave:                                    27:09                     And
so taking that money and giving it back to us investors as a dividend is a very
wise way to go. But when we’re talking about all these other companies, the
higher or the payout ratio, and especially if it’s a small cap that gives them
the less margin of error for things. And so I think that’s one of the big risks
that I would think would be involved in getting an vesting with a monthly
dividend stock. Yeah, that’s a good insight.

Dave:                                    27:36                     All
right folks, we’ll, that is going to wrap up our discussion for tonight. I hope
you enjoyed our listener questions and our answers for them. There’s a lot of
good nuggets in there and hopefully you find something that they can help you
with your investing. So again, as always go out there and invest with a margin
of safety emphasis on the safety. Have a great week and we’ll talk to you on
that.

Announcer:                        27:53                     We hope you enjoyed this content. Seven steps to understanding the stock market shows you precisely how to break down the numbers and an engaging and ready to go away with real life. Examples, get access today at stockmarketpdf.com until next time. Have a prosperous day.

Announcer:                        28:19                     The
information contained is for general information and educational purposes only.
It is not intended for a substitute for legal, commercial and or financial
advice from a licensed professional review. Our full disclaimer at e, investing
for beginners.com.

The post IFB105: Q&A: Is Acorns Worth it? Should I Buy Small Cap Stocks? appeared first on Investing for Beginners 101.

Jun 08 2019
28 mins
Play

Similar Podcasts