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My statement shows I lost money..did I really lose?

The short answer is—you have an unrealized loss also known as a “paper loss.”  If you purchased a stock or other investment at a certain price and it’s down from your initial purchase price, you have an unrealized loss.  On “paper” it shows your stock has decreased in market value.

Example:

If you purchased 10 shares of XYZ stock for $10 per share, your total cost excluding commission was $100 (10 x $10).

If you are still holding the 10 shares of XYZ and the stock price goes down to $8, your total market value is $80 (10 x $8). You have an unrealized or paper loss of $20 ($100-$80).

As long as you still own the stock, your loss is unrealized. Technically, you have not been affected by the loss. That ALL changes when you sell the stock.

Using the same example, if you sell the 10 shares of XYZ for $8, then you have a realized loss of $20.  It’s no longer an unrealized loss on paper; it has been realized.

Although this example illustrates a loss, it is the same for gain. Once you sell the stock, you will either have a realized gain or loss

I’m here if you need me!

Stock Market downturn–what we know for sure!

Advisors, including myself, will tell you it’s difficult to perfectly time the market.  No one knows when it’s going to be the perfect time to buy or sell.  We don’t know the next “hot tip” nor do we have inside company information. What we do know is what history has shown us about the stock market. Although history cannot perfectly predict the future, it has provided us with useful data that can be used to make smart investing decisions.

Here is what we do know:

  1. Dollar Cost Averaging is a prudent strategy. You pick a stock, exchange-traded fund (ETF) or mutual fund and you invest the same amount at the same time regardless of what is going on in the market.
  2. There will always be market corrections. During these downturns, there are opportunities to buy securities that are trading at a discount.
  3. Diversification is the key to shielding your portfolio against bear markets. Spread your “eggs” across different baskets. Having all your money in one investment is risky.
  4. Most investors are not active traders. Actively trading your portfolio does not guarantee you will make money. A buy and hold strategy is a tried-and-true strategy for long-term investing.
  5. The Stock Market has corrected, pulled back, and crashed. It has always come back.

There are opportunities to be successful in a down market. All you need is a strategy and discipline.

If you want to learn more about investing in stocks, visit “She’s So Wealthy Academy”

https://reshellsmith.teachable.com/p/ready-stock-go

 

I’m here if you need me,

 

Reshell

Emergency Interest Rate Cut…Self-Check Time! #Selfie

On a Sunday…a SUNDAY, the Federal Reserve moved to cut interest rates to 0-0.25 percent.  As well they increased their purchase of Treasuries and Mortgage Backed Securities.  These powerful moves were made to combat the effect of the Coronavirus on the economy and to lessen the likelihood of a recession.  When the Fed lowers rates, their goal is generally to stimulate the economy and encourage borrowing and investing. I believe it was done on a Sunday to calm fears before the Stock Market opens.

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said. “The effects of the coronavirus will weigh on economic activity in the near-term and pose risks to the economic outlook.”

Although you may make less on your savings, there is opportunity on the other end of the spectrum. Here are a few things you should be doing:

  1. Review the terms of your mortgage. This may be an opportunity to refinance your mortgage. If you are able to lower your interest rate and keep fees and closing costs low, this could be a huge win and a significant savings.  Mortgage interest rates do not ALWAYS fall after a cut, however in this case, experts believe they will.
  2. Home Equity Line of Credits (HELOCs) typically fall by the amount of the rate cut. If you have an outstanding balance, you should see your expense decrease. As well, if you are considering a HELOC, this could be the time to access your equity line.
  3. Review any CDs coming due. Do not automatically rollover your CDs into new ones.  Carefully review the new rates! The new rates are likely to be very low—lower than they are today.  You may find better opportunities elsewhere.
  4. If you are considering taking on a new loan like an auto loan, this may be an opportune time. The payment and the amount of interest you pay over the years will be lower—depending on your credit, of course.
  5. Your credit card debt could be adjusted. If your rate isn’t adjusted automatically, call and ask the credit card company your options. Credit card companies can change variable interest rates whenever they want. As long as they provide you advanced notice, they can adjust your rate. Since the Fed has lowered interest rates, credit card companies will likely follow suit.
  6. Look for opportunities in the Stock Market. Lower interest rates make the stock market look more attractive. Lower rates make it easier for businesses to borrow and invest. If it’s easier to borrow and invest, then more money will be spent. Although there’s no guarantee of how the market will react, historically when the Fed increases interest rates, the stock market goes down.  When the Fed decreases interest rates, the stock market goes up.

We are in a unique situation that calls for special attention from those who manage and promote stability in the financial markets. You should pay attention to how it affects you personally and if possible, make your financial situation better. Do a self-check! #Selfie

End of the year TOP 5!

Although it seems like you have time to get your finances in order before year end…trust me, you do not.  NOW is the time. If you wait any longer, you could get caught up in the joy and hoopla of the holidays causing you to push your tasks off.  Don’t let the holidays BREAK you! Here are 5 items you need to cross off your end of year financial checklist:

  1.  Use it or lose it FSA benefits.  If you have put money aside in your Flexible Spending Account during the year, you must spend it ALL by December 31st. If you do not spend the funds in your account, you lose them.  Losing your funds means they go back to your employer to use at their discretion.
  2. Open Enrollment is upon us.  This is typically the time of year your employer will allow you to update your benefits.  Benefits like disability insurance, retirement contributions, and life insurance.  Make sure you choose the benefits that are best suited for your family and your budget.  If you are married, discuss your choices with your spouse so you are not duplicating benefits.
  3. If necessary, rebalance your retirement account (401k, 403B, etc.). Work with your financial advisor to determine if you need to rebalance your portfolio. Based on market performance throughout the year, your retirement account allocation may have shifted. You will need to manually adjust your allocation to get back to your original targets—–unless you have a Target Fund that adjusts automatically.
  4. This is tax planning time! Many of the actions you need to take to help reduce your taxes have to be done by December 31st.  You may need to take some last minute deductions, defer your income, take required minimum distributions or offset capital gains.  These actions must take place by year end.  If not, you could make costly money mistakes.
  5. Review your goals to determine what you accomplished and what you did not.  Reviewing your goals now will help as you start to make goals for next year. Look at the goals you accomplished and what it required to be successful.  Make sure you carry those behaviors into next year.

I’m here if you need me,

Reshell

https://reshellsmith.com/contact/

Focus on the F.I.R.E! (Financial Independence Retire Early)

Have you heard of the new F.I.R.E movement?  It stands for financial independence, retire early. Actually it’s not a new concept, it’s just a new way of talking about early retirement.  It touts a different–quicker way to leave your 9 to 5. The ultimate goal with F.I.R.E is to be free from debt and live off your investments and savings at an early age. Some, who are part of the movement are trying to retire as early as age 30.

How? Historically, financial advisors have encouraged investors to save and invest 10%-15% of their income. Members of the F.I.R.E community suggest you save more–significantly more.  Many in the community have challenged themselves to save as much as 50%-70%.  That sounds like a very lofty goal, but they are doing it by any means necessary.  Here are a few of their suggestions:

  • Live frugally
  • Bikes over cars
  • Grow your own food and cook at home
  • Become a minimalist
  • Live in a tiny house
  • Low cost investing
  • Low taxes
  • After retirement, take on seasonal or short-term jobs

Not everyone will latch on to the idea of retiring early.  It sounds good, but the execution can be challenging.  If the suggestions above don’t make you feel uncomfortable, you may be a good candidate for the movement.  F.I.R.E can offer you the opportunity to find your God-given purpose and live the life that you really desire without focusing on money.

I’m here if you need me,

Reshell

 

 

 

 

Life Insurance Question-Term or Perm?

If we knew when we were going to pass away, buying life insurance wouldn’t be so hard. Although we don’t know the time or the day of our passing, we can plan for it. Part of that plan should include protecting our family and our assets.  One of the easiest and most cost-efficient ways to do that is to purchase life insurance.

There are two categories of life insurance you need to know about–Term and Permanent. Here are a few facts about both.

A few facts about Term Insurance

  • As long as the premium is paid, you are protected until the term ends (1-30 years)
  • Premiums are usually lower than they are for permanent insurance (affordable)
  • Does not build cash value
  • May offer the option to convert to a permanent policy
  • Death benefits are tax-free

A few facts about Permanent Insurance

  • As long as the premium is paid, you are protected for your whole life
  • Premiums are higher than they are for term insurance
  • Builds cash value which you can withdraw or take a loan from
  • Death benefits are tax-free
  • There are several types of permanent insurance

Knowing the difference between Term and Permanent insurance is just the first step.  I recommend that you work with a professional to get through the next steps like, how much insurance you need, who should be the beneficiary, and what assets need to be protected,  just to name a few.

I’m here if you need me,

Reshell

http://www.reshellsmith.com/contact

 

 

 

 

 

Ready, Stock, Go!

I am learning on a daily basis that people want to buy stocks, they just don’t know how.  They don’t know where to start, who to call, or where to go.  If you are one of those people, I GOT YOU!  First, let me say this one thing. You can start investing on your own however, I always encourage new investors to get professional help.  Getting professional help can minimize costly money mistakes. If you are new to investing and have limited assets, you want to avoid as many mistakes as possible.

Here are a few ways to start investing in stocks.

  1.  Buy the individual stock.  There are many ways you can buy an individual stock.  One, you can open an account at a Brokerage Firm like Charles Schwab, E-Trade, TD Ameritrade or any other similar firm.  Keep in mind, there may be a minimum to open an account.  Two, you can use an online app like Robin Hood, Acorn or Stash. Many of the online apps are for the investor who can do everything on their own. You may have limited help. Lastly, you can buy stock directly from the company through their Dividend Reinvestment Plan or DRIP.  For example, if you want to buy ABC stock, you would call the company DIRECTLY and set up an account to make monthly purchases of the stock.
  2. Buy Exchange Traded Funds (ETFs).  Instead of buying stocks individually, ETFs allow you to buy a “basket of securities.” Because you are buying a basket of securities, ETFs are considered to be well diversified.  ETFs also have the ability to be traded like a stock.  They are bought and sold throughout the day on the market exchanges. Just like with individual stocks, you will need to open an account with a firm or online app.
  3. Buy a Mutual Fund.  Mutual funds are professionally managed portfolios. Essentially, investors’ money is pooled together to purchase shares of different securities.  Mutual funds can be made up of stocks, bonds, CDs, commodities or a mixture of these.  They typically have higher fees than individual stocks and ETFs.  As well, there is typically more turnover than an ETF.  You can purchase mutual funds through a firm, an online app or sometimes with the mutual fund company.  You are likely to see mutual funds offered through employer retirement plans.

These are 3 of the most common ways to get exposure to stocks.  There are more ways, but they are usually reserved for more sophisticated or speculative investors.

I’m here if you need me!

https://reshellsmith.com/contact/