Stock picking tools of modern investing for dummies

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And if the earnings were at a hundred, that would be a price to earnings of By the time you get to the ninth year, earnings will be at about three Oh five, which is three times more than where they started nine years ago. Our company, its user needs to grow the business and, and make those profits grow for shareholders. Andrew : And they do things like share buybacks and things like that, but it kind of illustrates. So as a typical example, if a stock has a PE and their growth rates about the same, it still takes nine years until that investment, that price you paid for, it pays off in earnings over the life of that investment.

To me, that sounds like a long time; nine years sounds pretty long. Andrew : And, and, you know, you, you do see the price, earnings ratios stay very high for very long periods. So my kind of example of trying to take some common sense and use that in a stock-picking approach.

So they have their area of the Northeast in the United States where they sell an overwhelming majority of their, of their products, you know, that snowbell up there. The price of books, reasonable prices, sales, decent things look good, and they have a lot of free cash flow. However, if you think about what the future of the Northeast holds, and then you look at some other interesting data. So something that I wanted to look at was population trends.

So I went and, you know, Wikipedia has a great little chart where they bring to the States, and they showed the percentage of growth and everything. Andrew : And so they took from , And as I looked at all of the different population, growth trends, you know, it seemed everybody was moving West or extremely South with Texas and Florida.

You would probably look at it as a more defensive type of investment. If you can find as many good trends and ride on top of those. I mean, yes, there will be hope, you know, you would hope to see GDP growth, population growth. So, you know, when it comes to this particular investment, I could be completely wrong. They could have plenty of market share they still take. I got super excited about this one, but I think if you look at a company and you try to put it where your goals are.

So for me, I want something five, 10, 15 years. I feel good about holding. Dave : I love that idea Of looking at, beyond just the numbers and what the company is doing, but thinking about the population trends in the area and thinking about in essence, their, their niche, and how they operate within that niche.

And I got 1 million ideas per month. Dave : So you have to ask yourself, are those things logical? And the revenue growth is great. Dave : And is that company, do I, do I envision that that company is still going to be here at that time. Now, some could argue that Amazon will become the economy of the United States at some point, and you know, who knows, but at some point logically, something like that has to stop.

Still, you just, you have to think about some of those things and try to make sure that you put all those reasons in comparison to what is what you see going on and how logical you think that is—so doing some of the things that like Andrew was doing, going beyond just looking at the numbers of the company, looking at industry averages, looking at other companies in the industry.

And generally, the better something does, the more competition is attracted to that because people want to try to take a piece of that pie. Do I, is this something that I think they can achieve? Andrew : Yeah. I love the idea of reading the annual reports of competitors. And so sometimes it is kind of like putting pieces together in a puzzle. So, you know, it makes it tough because the financial data is nice. When it comes to gathering kind of big picture data, common sense data industry data, there is not a uniform standard for that.

And so sometimes you do have to kind of do a little bit of Sherlock homie, and then really just find information as you can. Warren Buffett talks about how just to have a circle of competence and to know it very well. Andrew : And those were like, just like a one, two combos.

It was like a cheeseburger Coke and good times. And they talked about the very first episode was talking about fast food in the United States. I would look at all. You can eat Brazilian steakhouse kind of mail, but it was a major export. Andrew : And when Buffett talks about that, he talks about Coke. He talks about how it brings that emotional attachment. So, you know, he, he knew those numbers very easily. And so they had a lot of pricing power because they were a leader.

Andrew : And then they had a lot of kind of wiggle room to work with. They had lower costs through having bottlers do all the manufacturing and, and they just had a lot of competitive advantages. You could see very easily how they can increase profits just through their sheer size and from the loyalty of the brand.

So, you know if investing was a hundred percent that easy, we would all be billionaires because we could just kind of look around us and see the things that we like and invest in those. This acronym is short for exchange traded funds and these funds have different investing strategies. They can invest in stocks, bonds, or both. There are also other ETFs that invest in certain sectors like technology, banks, healthcare, or any other type of market.

There are sector ETFs for almost any sector you can invest in. For example, a healthcare ETF would be comprised of companies from the healthcare industry and you would expect to find the big banks inside a financial ETF. Now, although ETFs are groups of stocks, bonds, or a mixture, they still trade like single shares of company stocks. Mutual Funds Although ETFs are very popular today, mutual funds are much older and have a longer track record. Therefore, if you invest with a k , you most-likely are investing in mutual funds.

Again, the main difference between ETFs and mutual funds is how they trade. Instead of trading in real-time, mutual funds trade once-a-day after the market closes. And, not only did you want to sell out of that mutual fund, but so did thousands of other investors. Initial Investment A second difference is the minimum initial investment. With ETFs, you only need to pay the price for one share. The third difference between mutual funds and ETFs are fund expenses.

Most mutual funds have higher fund expenses than similar ETFs. Index Funds Oftentimes, these may be your only investment option in a k plan. Index funds are one form of mutual funds. They track a broad market index. This means they try to match the market performance with passive investing.

As a result, they have lower fund expenses than active funds. It invests in 3, of the largest publicly-traded companies. To save you money, many online brokers now offer index ETFs and you invest by the share. And, it only has an expense ratio of 0. You might decide to go with the ETF because of the lower fund expenses. With a 0.

Many experts believe ETFs will soon completely phase out mutual funds including a financial advisor with over years experience interviewed on the Money Peach podcast. Money Tip: If you have a k, a great free tool to see what fees you are paying is Blooom. Target Date Funds Another mutual fund option is target retirement date funds. If you want to retire in , you choose a fund. But, you should still make sure their investment goal matches your goals.

And, that the actual performance meets your expectations. These funds invest in a basket of stocks and bonds. They also hold index funds to keep fund expenses low. As you near retirement, the fund swaps stocks for bonds.

These funds are a low-maintenance way to invest. However, more effort goes into managing these funds than an index fund, therefore you can expect to pay a higher expense ratio for them. Therefore, your bond is now more desirable which means the price of that bond went up.

Similar to how a stock goes up in value, same holds true for a bond. The easiest way to remember how bonds work is this: As interest rates go up, bond prices go down. As interest rates go down, bond prices go up. Breaking Down the Dividends Earlier we mentioned dividends, which were profits of the company distributed back to the shareholders.

Many dividends are distributed at least once a year, but they can be paid out monthly, quarterly, etc. Interestingly enough, most index funds pay them in December. In a nutshell, compound interest is literally where your money makes money for you. As you can see, your money is working for you by earning interest on the original amount AND the interest earned from the year before.

As this plays out year-after-year, the amount begins to compound…. One amazing way to further increase compound interest in your favor is by reinvesting your dividends. I would start with M1 Finance for a few reasons: You can invest in partial or fractional shares. The reason why I like this concept is purchasing a single stock can be expensive!

With M1 Finance, you can purchase Amazon with even just a few dollars. These goals can range from beginner investing, retirement planning, or even a more tailored responsible investing approach. In fact, M1 Finance does not charge any commissions or markups on trades you place. Your Employer k Plan The most well-known place to invest is inside your k plan. The main reason why is for matching k contributions from your employer.

If your employer offers a match, maximize it! After you meet the match, you might decide to invest more. But, not all k plans are the same and some have some terribly high fees and very lousy investment choices. A great tool I personally use to check for k ,b, a fees is Blooom. You must pay taxes every year on your non-retirement account investments. With a pre-tax k, you will reduce your taxable income.

Are There k Tax Disadvantages? Financial expert Rebecca Walser was on the Money Peach podcast with a completely different point of view about the k. You can listen to the interview below, but in a nutshell she explains: How we are in the lowest tax environment in U. Therefore, her debate is whether or not the k is a good plan right now. If taxes do increase, then we would actually be avoiding the lower taxes now to pay higher taxes later.

Instead of paying taxes when you withdraw the money, you pay taxes today and then invest into the ROTH k. Just like the k, your growth is also tax-deferred. You fund Traditional IRAs with pre-tax income. And, Roth IRAs receive your post-tax income.

No k Plan Available? There are so many very simple platforms which are perfect for someone getting started or even a seasoned pro.