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Whether it's stashed in your sock drawer or invested in complex instruments, we'll help you keep it safe and watch it grow.","relatedArticles":{"self":"https://dummies-api.dummies.com/v2/articles?category=34273&offset=0&size=5"},"hasArticle":true,"hasBook":true,"articleCount":2315,"bookCount":104},"_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"}},"relatedCategoriesLoadedStatus":"success"},"listState":{"list":{"count":10,"total":2310,"items":[{"headers":{"creationTime":"2023-09-07T15:27:45+00:00","modifiedTime":"2023-09-07T15:29:00+00:00","timestamp":"2023-09-07T18:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"REITs For Dummies Cheat Sheet","strippedTitle":"reits for dummies cheat sheet","slug":"reits-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Learn what real estate investment trusts are, their main benefits and attributes, and what to consider before investing in one.","noIndex":0,"noFollow":0},"content":"A real estate investment trust (REIT) is a company that owns, manages, and/or finances real estate holdings. These holdings can be in the form of apartment buildings, hotels, shopping centers, self-storage facilities, warehouses, and even billboards, data centers, cell towers, woodlands, and many others.\r\n\r\nREITs have stock attributes (liquidity and transparency) and, at the same time, enable you to enjoy the benefits of owning income-producing real estate. With this Cheat Sheet, you get a quick primer on the benefits of REIT investment, how to add REITs to your portfolio, how to choose smart REITs, and how to become a virtual landlord without the aggravation of owning private real estate.","description":"A real estate investment trust (REIT) is a company that owns, manages, and/or finances real estate holdings. 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He’s published over 4,000 articles during the last 13 years, and he is the top writer on Seeking Alpha, the world’s largest investing community. He is also the CEO of Wide Moat Research, senior analyst at iREIT®, and a REIT ETF provider (iREIT® MarketVector™ Quality REIT Index). Brad teaches REITs at New York University and other schools such as Penn State University, Clemson University, the University of North Carolina, Cornell University, and Georgetown University.</p>","authors":[{"authorId":35328,"name":"Brad Thomas","slug":"brad-thomas","description":"<strong>Brad Thomas</strong> has over 30 years of real estate investing experience. He’s published over 4,000 articles during the last 13 years, and he is the top writer on Seeking Alpha, the world’s largest investing community. He is also the CEO of Wide Moat Research, senior analyst at iREIT®, and a REIT ETF provider (iREIT® MarketVector™ Quality REIT Index). Brad teaches REITs at New York University and other schools such as Penn State University, Clemson University, the University of North Carolina, Cornell University, and Georgetown University.","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/35328"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781394185351&quot;]}]\" id=\"du-slot-64fa0fdead33c\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781394185351&quot;]}]\" id=\"du-slot-64fa0fdeadc8d\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":0,"title":"","slug":null,"categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/"}}],"content":[{"title":"Benefits of being a virtual landlord","thumb":null,"image":null,"content":"<p>Being an owner in a REIT (real estate stocks) can be an effective way to gain access to a proven income-oriented asset class — property ownership — but without the day-to-day headaches that can come from being a hands-on landlord.</p>\n<p>By investing in REITs, you can effectively bypass all that by being a virtual landlord instead. Following, are several benefits of investing in REITs.</p>\n<h3><strong>REITs invest in a wide range of property types</strong></h3>\n<p>REITs invest in a wide range of property types. No matter where you’re headed locally (in the United States, at least), there’s a good chance you’ll find yourself in close proximity to a REIT–owned property.</p>\n<p>That workplace, apartment building, grocery store, medical facility, hotel, or gym? They might be REIT-owned properties. By leasing out space and collecting rent on its real estate, REITs generate income that is then paid out to shareholders in the form of dividends.</p>\n<h3><strong>REITs can have strong pricing power</strong></h3>\n<p>As a REIT owner, you can take advantage of the pricing power that exists with income-producing real estate. REITs can capitalize on the demand for leasing space that exceeds new supply, which allows rents to grow. This supply-demand imbalance gives most REITs strong rental pricing power.</p>\n<p>Net-lease REITs (REITs that own properties leased to single tenants under agreements in which the tenant pays for rent and some or all of operating expenses) are also attractive because of their long-term leases that generate durable cash flows in every economic climate.</p>\n<h3><strong>As rents grow, dividends grow</strong></h3>\n<p>Because REITs offer exceptional pricing power, they’re able to raise rents based on inflation, and they’re also well-prepared for high interest rates due to their efficient cost controls and balance sheet management practices.</p>\n"},{"title":"REIT investment considerations","thumb":null,"image":null,"content":"<p>Because of the durable dividend income REITs provide, they can be an important investment both for retirement savers and for retirees who require a continuing income stream to meet their living expenses.</p>\n<p>REIT dividends are driven by the steady stream of contractual rents paid by the tenants of their properties.</p>\n<p>Other important attributes of owning REITs to consider include:</p>\n<ul>\n<li><strong>Liquidity:</strong> REIT shares are traded on major stock exchanges.</li>\n<li><strong>Transparency:</strong> REITs have independent directors, analysts, and auditors that provide oversight.</li>\n<li><strong>Diversification:</strong> REITs offer access to the real estate market with low correlation with other stocks and bonds.</li>\n<li><strong>Performance:</strong> REITs have provided long-term total returns like those of other stocks.</li>\n</ul>\n"},{"title":"Choosing the best REITs","thumb":null,"image":null,"content":"<p>With over 890 listed REITs around the globe, where do you begin? The answer depends on your objective, and of course your own risk tolerance level.</p>\n<p>The great thing about REITs is that you can be a landlord for practically every property category, all unique with their own demand drivers.</p>\n<p>As you get started, here are a few guidelines worth considering:</p>\n<ul>\n<li>\n<p class=\"first-para\"><strong>Own more than one REIT or consider a REIT ETF. </strong>Diversification is important to the investing process, so when you start adding REITs to your portfolio, it’s important to spread your capital across multiple property sectors and geographies. In other words, don’t put all of your eggs in one basket.</p>\n<p class=\"child-para\">Also, there are many different exchange-traded funds (ETFs), closed-end fund, and mutual fund alternatives that may be a good way to become a virtual landlord without having to do all the heavy lifting.</p>\n</li>\n<li><strong>Focus on quality. </strong>REITs come in many shapes and sizes, and it’s important to always look under the hood before buying. Spend time researching the underlying fundamentals to ensure that the dividend is safe and growing (on a frequent basis). High-quality REITs can expect to have good access to capital during most market cycles.</li>\n<li><strong>Bet on the jockey. </strong>Most REITs are internally managed, which means you (the investor) are paying for the salaries of the management team. Always think of yourself as an owner and make sure (as the owner) your interests are aligned with management. Always maintain skepticism and in the words of Ronald Reagan, “trust but verify.”</li>\n<li><strong>Don’t chase yield. </strong>By law, REITs pay out high dividends, but always remember that a double-digit dividend yield suggests limited growth prospects for the REIT. There’s nothing wrong with owning these higher-yielding stocks, but often these double-digit yields suggest a potential dividend cut.</li>\n<li><strong>Buy low. </strong>Don’t overpay. Always make sure you’re getting value and buy REITs just like you would any other investment. Sometimes it takes patience, but over the long haul, your returns are magnified when you buy in at a cheaper price.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2023-09-07T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":300521},{"headers":{"creationTime":"2016-03-27T16:52:08+00:00","modifiedTime":"2023-09-05T17:00:39+00:00","timestamp":"2023-09-05T18:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"General Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"},"slug":"general-personal-finance","categoryId":34311}],"title":"Personal Finance For Dummies Cheat Sheet","strippedTitle":"personal finance for dummies cheat sheet","slug":"personal-finance-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"A lot of personal finance advice focuses narrowly on investing. But money is not an end in itself; it's a tool to make your life better. Here's how.","noIndex":0,"noFollow":0},"content":"A lot of financial advice ignores the big picture and focuses narrowly on investing. Because money is not an end in itself but a part of your whole life, connecting your financial goals to the rest of your life is important.\r\n\r\nYou need a broad understanding of personal finance to include all areas of your financial life: spending, taxes, saving and investing, insurance, and planning for major goals such as education, buying a home, and retirement. The following keys to success aren’t a magic elixir, but they can help you get started thinking about the big picture.","description":"A lot of financial advice ignores the big picture and focuses narrowly on investing. Because money is not an end in itself but a part of your whole life, connecting your financial goals to the rest of your life is important.\r\n\r\nYou need a broad understanding of personal finance to include all areas of your financial life: spending, taxes, saving and investing, insurance, and planning for major goals such as education, buying a home, and retirement. The following keys to success aren’t a magic elixir, but they can help you get started thinking about the big picture.","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Bruce Brammall</b> is a licensed financial adviser and mortgage broker, personal finance journalist, best-selling author and successful property investor. <b>Eric Tyson</b> and <b>Robert S. Griswold</b> are independently successful investors.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"primaryCategoryTaxonomy":{"categoryId":34311,"title":"General Personal Finance","slug":"general-personal-finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":259433,"title":"Somewhat Uncommon Investments — Bitcoin, Collectibles, Gold","slug":"somewhat-uncommon-investments-bitcoin-collectibles-gold","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259433"}},{"articleId":259430,"title":"How to Decrease Debt","slug":"how-to-decrease-debt","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259430"}},{"articleId":259427,"title":"Avoid Overspending to Improve Financial Health","slug":"avoid-overspending-to-improve-financial-health","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259427"}},{"articleId":259423,"title":"The Difference between Bad Debt and Good Debt","slug":"the-difference-between-bad-debt-and-good-debt","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259423"}},{"articleId":259420,"title":"How to Determine Your Financial Net Worth","slug":"how-to-determine-your-financial-net-worth","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259420"}}],"fromCategory":[{"articleId":298881,"title":"34 Ways To Save Money on Utilities","slug":"34-ways-to-save-money-on-utilities","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/298881"}},{"articleId":288537,"title":"Financial Security For Dummies Cheat Sheet","slug":"financial-security-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/288537"}},{"articleId":259430,"title":"How to Decrease Debt","slug":"how-to-decrease-debt","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259430"}},{"articleId":259420,"title":"How to Determine Your Financial Net Worth","slug":"how-to-determine-your-financial-net-worth","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259420"}},{"articleId":251786,"title":"The Impact of Investing for College Costs","slug":"impact-investing-college-costs","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251786"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282458,"slug":"personal-finance-for-dummies-9th-edition","isbn":"9781394207541","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"amazon":{"default":"https://www.amazon.com/gp/product/1394207549/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1394207549/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1394207549-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1394207549/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1394207549/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/personal-finance-for-dummies-10th-edition-cover-9781394207541-203x255.jpg","width":203,"height":255},"title":"Personal Finance For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b>Bruce Brammall</b> is a licensed financial adviser and mortgage broker, personal finance journalist, best-selling author and successful property investor. <b><b data-author-id=\"8975\">Eric Tyson</b></b> and <b>Robert S. Griswold</b> are independently successful investors.</p>","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Bruce Brammall</b> is a licensed financial adviser and mortgage broker, personal finance journalist, best-selling author and successful property investor. <b>Eric Tyson</b> and <b>Robert S. Griswold</b> are independently successful investors.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781394207541&quot;]}]\" id=\"du-slot-64f76cdf5fd56\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781394207541&quot;]}]\" id=\"du-slot-64f76cdf60b2d\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":176151,"title":"Eric Tyson’s Keys to Personal Financial Success","slug":"eric-tysons-keys-to-personal-financial-success","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/176151"}}],"content":[{"title":"Personal finance fundamentals","thumb":null,"image":null,"content":"<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Take charge of your finances.</b> Procrastinating is detrimental to your long-term financial health. Don’t wait for a crisis or major life event to get your act together. Start implementing a plan now.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Live within your means and don’t try to keep up with your co-workers, neighbors, and peers.</b> Many who engage in conspicuous consumption are borrowing against their future; some end up bankrupt.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Save and invest at least 5 to 10 percent of your income.</b> Preferably, invest through a retirement savings account to reduce your taxes and ensure your future financial independence.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Own your home.</b> In the long run, owning is more cost-effective than renting, unless you have a terrific rent-control deal. But don’t buy until you can stay put for a number of years.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>If you’re married, make time to discuss joint goals, issues, and concerns.</b> Be accepting of your partner’s money personality; learn to compromise and manage as a team.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Prioritize your financial goals and start working toward them.</b> Be patient. Focus on your accomplishments and learn from your mistakes.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Prepare for life changes.</b> The better you are at living within your means and anticipating life changes, the better off you will be financially and emotionally.</p>\n</li>\n</ul>\n<p class=\"article-tips remember\">Invest in yourself and others. Invest in your education, your health, and your relationships with family and friends. Having a lot of money isn’t worth much if you don’t have your health and people to share your life with. Give your time and money to causes that better our society and world.</p>\n"},{"title":"Credit and insurance","thumb":null,"image":null,"content":"<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Don’t buy consumer items (cars, clothing, vacations, and so on) that lose value over time on credit.</b> Use debt only to make investments in things that gain value, such as real estate, a business, or an education.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Use credit cards only for convenience, not for carrying debt.</b> If you have a tendency to run up credit-card debt, then get rid of your cards and use only cash, checks, and debit cards.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Purchase broad insurance coverage to protect against financial catastrophes.</b> Eliminate insurance for small potential losses.</p>\n</li>\n</ul>\n"},{"title":"Investing and financial advice","thumb":null,"image":null,"content":"<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Understand and use your employee benefits.</b> If you’re self-employed, find the best investment and insurance options available to you and use them.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Research before you buy.</b> Never purchase a financial product or service on the basis of an advertisement or salesperson’s solicitation.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Avoid financial products that carry high commissions and expenses.</b> Companies that sell their products through aggressive sales techniques generally have the worst financial products and the highest commissions.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Don’t purchase any financial product that you don’t understand.</b> Ask questions and compare what you’re being offered to the most highly respected sources.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Invest the majority of your long-term money in ownership vehicles that have appreciation potential, such as stocks, real estate, and your own business.</b> When you invest in bonds or bank accounts, you’re simply lending your money to others, and the return you earn probably won’t keep you ahead of inflation and taxes.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Avoid making emotionally based financial decisions.</b> For example, investors who panic and sell their stock holdings after a major market correction miss a buying opportunity. Be especially careful in making important financial decisions after a major life change, such as a divorce, job loss, or death in your family.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Make investing decisions based upon your needs and the long-term fundamentals of what you’re buying.</b> Ignore the predictive advice offered by financial prognosticators — nobody has a working crystal ball. Don’t make knee-jerk decisions based on news headlines.</p>\n</li>\n</ul>\n<p class=\"article-tips remember\">Hire yourself first. You are the best financial person you can hire. If you need help making a major decision, hire conflict-free advisors who charge a fee for their time. Work in partnership with advisors — don’t abdicate control.</p>\n<p>© Eric Tyson</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2023-09-05T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208319},{"headers":{"creationTime":"2016-03-26T23:10:53+00:00","modifiedTime":"2023-09-01T18:04:36+00:00","timestamp":"2023-09-01T21:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"},"slug":"bonds","categoryId":34291}],"title":"Buying U.S. Savings Bonds in an Uncertain Economy","strippedTitle":"buying u.s. savings bonds in an uncertain economy","slug":"buying-u-s-savings-bonds-in-an-uncertain-economy","canonicalUrl":"","seo":{"metaDescription":"In a down economy, U.S. savings bonds are one of the safest investments you can make. Savings bonds are nonmarketable securities — when you purchase them, they’","noIndex":0,"noFollow":0},"content":"<p>In a down economy, U.S. savings bonds are one of the safest investments you can make. Savings bonds are <i>nonmarketable</i> securities — when you purchase them, they’re registered to you and you can’t sell them to another investor.</p>\r\n<p>Uncle Sam offers two types of savings bonds, Series EE and Series I, which are backed by the full faith and credit of the U.S. government and are considered the safest of all investments. Here’s more info on each type:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Series EE bonds: </b>These bonds earn a fixed rate of return set by the U.S. Treasury. They’re <i>accrual bonds,</i> which means the interest accumulates and is compounded semiannually (rather than being paid to the owner as it’s earned each month). If you hold one of these bonds, you receive the interest when you redeem the bonds.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Series I bonds:</b> The interest you earn from I bonds comes in two parts:</p>\r\n <ul class=\"level-two\">\r\n <li><p class=\"first-para\">A fixed-rate component established when you purchase the bond</p>\r\n </li>\r\n <li><p class=\"first-para\">A second component that’s equal to the rate of inflation, adjusted semiannually (based on the consumer price index for March and September)</p>\r\n </li>\r\n </ul>\r\n<p class=\"child-para\">Although the fixed-rate interest component for Series I bonds is low, these bonds help protect you against inflation. If inflation goes up, so does the interest rate you earn because the variable-rate portion is adjusted every six months; for example, when the fixed-rate component is 2 percent and the inflation adjustment is 5 percent, an investment in a Series I bond is guaranteed to return 7 percent. But remember, the total interest rate can also go down as the inflation adjustment decreases.</p>\r\n </li>\r\n</ul>\r\n<p>For both bonds, the purchase limit is $5,000 per Social Security number for each calendar year. You can easily purchase and redeem the bonds in electronic format through the <a href=\"http://www.treasurydirect.gov\" target=\"_blank\" rel=\"noopener\">Department of the Treasury’s Web site</a>. If you purchase the bonds electronically, you can get any denomination of $25 or more, including penny increments. The purchase price is equal to the face value.</p>\r\n<p>You can also purchase the bonds in paper form through various financial institutions and payroll savings plans. Paper I bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, and $5,000; they’re purchased for their face value. However, you can get paper versions of EE bonds at half their face value; they’ll be worth face value at maturity. Paper EE bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, $5,000, and $10,000.</p>\r\n<p>The interest on both bonds compounds semiannually for 30 years, but you don’t have to hold the bonds for that long. You can redeem the bonds after 12 months, but you pay a three-month interest penalty if you redeem the bonds within five years of the purchase date.</p>\r\n<p>As for tax treatment, U.S. savings bonds are exempt from state and local income tax. Federal income tax on interest earned can be deferred until redemption or final maturity, whichever occurs first. Tax benefits are available when you use the bonds for education purposes.</p>","description":"<p>In a down economy, U.S. savings bonds are one of the safest investments you can make. Savings bonds are <i>nonmarketable</i> securities — when you purchase them, they’re registered to you and you can’t sell them to another investor.</p>\r\n<p>Uncle Sam offers two types of savings bonds, Series EE and Series I, which are backed by the full faith and credit of the U.S. government and are considered the safest of all investments. Here’s more info on each type:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Series EE bonds: </b>These bonds earn a fixed rate of return set by the U.S. Treasury. They’re <i>accrual bonds,</i> which means the interest accumulates and is compounded semiannually (rather than being paid to the owner as it’s earned each month). If you hold one of these bonds, you receive the interest when you redeem the bonds.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Series I bonds:</b> The interest you earn from I bonds comes in two parts:</p>\r\n <ul class=\"level-two\">\r\n <li><p class=\"first-para\">A fixed-rate component established when you purchase the bond</p>\r\n </li>\r\n <li><p class=\"first-para\">A second component that’s equal to the rate of inflation, adjusted semiannually (based on the consumer price index for March and September)</p>\r\n </li>\r\n </ul>\r\n<p class=\"child-para\">Although the fixed-rate interest component for Series I bonds is low, these bonds help protect you against inflation. If inflation goes up, so does the interest rate you earn because the variable-rate portion is adjusted every six months; for example, when the fixed-rate component is 2 percent and the inflation adjustment is 5 percent, an investment in a Series I bond is guaranteed to return 7 percent. But remember, the total interest rate can also go down as the inflation adjustment decreases.</p>\r\n </li>\r\n</ul>\r\n<p>For both bonds, the purchase limit is $5,000 per Social Security number for each calendar year. You can easily purchase and redeem the bonds in electronic format through the <a href=\"http://www.treasurydirect.gov\" target=\"_blank\" rel=\"noopener\">Department of the Treasury’s Web site</a>. If you purchase the bonds electronically, you can get any denomination of $25 or more, including penny increments. The purchase price is equal to the face value.</p>\r\n<p>You can also purchase the bonds in paper form through various financial institutions and payroll savings plans. Paper I bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, and $5,000; they’re purchased for their face value. However, you can get paper versions of EE bonds at half their face value; they’ll be worth face value at maturity. Paper EE bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, $5,000, and $10,000.</p>\r\n<p>The interest on both bonds compounds semiannually for 30 years, but you don’t have to hold the bonds for that long. You can redeem the bonds after 12 months, but you pay a three-month interest penalty if you redeem the bonds within five years of the purchase date.</p>\r\n<p>As for tax treatment, U.S. savings bonds are exempt from state and local income tax. Federal income tax on interest earned can be deferred until redemption or final maturity, whichever occurs first. Tax benefits are available when you use the bonds for education purposes.</p>","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34291,"title":"Bonds","slug":"bonds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34291"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275083,"title":"How to Invest in Bonds","slug":"how-to-invest-in-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275083"}},{"articleId":208279,"title":"Bond Investing For Dummies Cheat Sheet","slug":"bond-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208279"}},{"articleId":207444,"title":"Investing in Bonds For Dummies Cheat Sheet","slug":"investing-in-bonds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207444"}},{"articleId":202861,"title":"Savings Bonds Pros and Cons","slug":"savings-bonds-pros-and-cons","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202861"}},{"articleId":201130,"title":"Investing in Global Bonds","slug":"investing-in-global-bonds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","bonds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/201130"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-64f2510eb8af2\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;bonds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-64f2510eb9530\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2023-09-01T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":202959},{"headers":{"creationTime":"2016-03-26T18:03:03+00:00","modifiedTime":"2023-08-31T20:58:33+00:00","timestamp":"2023-08-31T21:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"},"slug":"funds","categoryId":34296}],"title":"Commodity ETFs: A Vastly Improved Way to Buy Gold","strippedTitle":"commodity etfs: a vastly improved way to buy gold","slug":"commodity-etfs-a-vastly-improved-way-to-buy-gold","canonicalUrl":"","seo":{"metaDescription":"When, in November 2004, State Street Global Advisors introduced the first gold ETF, it was a truly revolutionary moment. You buy a share just as you would buy a","noIndex":0,"noFollow":0},"content":"<p>When, in November 2004, State Street Global Advisors introduced the first gold ETF, it was a truly revolutionary moment. You buy a share just as you would buy a share of any other security, and each share gives you an ownership interest in one-tenth of an ounce of gold held by the fund.</p>\r\n<p>Yes, the gold is actually held in various bank vaults. You can even see pictures of one such vault filled to near capacity (very cool!) at S<a href=\"http://www.spdrgoldshares.com\" target=\"_blank\" rel=\"noopener\">PDR Gold Shares website</a>.</p>\r\n<p>If you are going to buy gold, this is far and away the easiest and most sensible way to do it.</p>\r\n<p>You currently have several ETF options for buying gold. Two that would work just fine include the original from State Street — the SPDR Gold Shares (GLD) — and a second from iShares introduced months later — the iShares Gold Trust (IAU). Both funds are essentially the same. Flip a coin (gold or other), but then go with the iShares fund, simply because it costs less: 0.25 percent versus 0.40 percent.</p>\r\n<p>Strange as it seems, the Internal Revenue Service considers gold to be a collectible for tax purposes. A share of a gold ETF is considered the same as, say, a gold Turkish coin from 1923 (don’t ask). So what, you ask? As it happens, the long-term capital gains tax rate on collectibles is 28 percent and not the more favorable 15 percent afforded to capital gains on stocks.</p>\r\n<p class=\"Tip\">Holding the ETF should be no problem from a tax standpoint (gold certainly won’t pay dividends), but when you sell, you could get hit hard on any gains. Gold ETFs, therefore, are best kept in tax-advantaged accounts, such as your IRA. (This strategy won’t serve you well if gold prices tumble and you sell. Then, you’d rather have held the ETF in a taxable account so you could write off the capital loss.)</p>","description":"<p>When, in November 2004, State Street Global Advisors introduced the first gold ETF, it was a truly revolutionary moment. You buy a share just as you would buy a share of any other security, and each share gives you an ownership interest in one-tenth of an ounce of gold held by the fund.</p>\r\n<p>Yes, the gold is actually held in various bank vaults. You can even see pictures of one such vault filled to near capacity (very cool!) at S<a href=\"http://www.spdrgoldshares.com\" target=\"_blank\" rel=\"noopener\">PDR Gold Shares website</a>.</p>\r\n<p>If you are going to buy gold, this is far and away the easiest and most sensible way to do it.</p>\r\n<p>You currently have several ETF options for buying gold. Two that would work just fine include the original from State Street — the SPDR Gold Shares (GLD) — and a second from iShares introduced months later — the iShares Gold Trust (IAU). Both funds are essentially the same. Flip a coin (gold or other), but then go with the iShares fund, simply because it costs less: 0.25 percent versus 0.40 percent.</p>\r\n<p>Strange as it seems, the Internal Revenue Service considers gold to be a collectible for tax purposes. A share of a gold ETF is considered the same as, say, a gold Turkish coin from 1923 (don’t ask). So what, you ask? As it happens, the long-term capital gains tax rate on collectibles is 28 percent and not the more favorable 15 percent afforded to capital gains on stocks.</p>\r\n<p class=\"Tip\">Holding the ETF should be no problem from a tax standpoint (gold certainly won’t pay dividends), but when you sell, you could get hit hard on any gains. Gold ETFs, therefore, are best kept in tax-advantaged accounts, such as your IRA. (This strategy won’t serve you well if gold prices tumble and you sell. Then, you’d rather have held the ETF in a taxable account so you could write off the capital loss.)</p>","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <p><b>Russell Wild</b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34296,"title":"Funds","slug":"funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":183699,"title":"Choosing the Best ETFs","slug":"choosing-the-best-etfs","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183699"}},{"articleId":183698,"title":"How ETFs Differ from Mutual Funds","slug":"how-etfs-differ-from-mutual-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183698"}},{"articleId":183697,"title":"Websites for Up-to-Date ETF Information","slug":"websites-for-up-to-date-etf-information","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183697"}},{"articleId":183683,"title":"Asking a Financial Professional about Working ETFs into Your Portfolio","slug":"asking-a-financial-professional-about-working-etfs-into-your-portfolio","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183683"}}],"fromCategory":[{"articleId":296619,"title":"Hedge Funds For Dummies Cheat Sheet","slug":"hedge-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/296619"}},{"articleId":209064,"title":"Mutual Funds For Dummies Cheat Sheet","slug":"mutual-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/209064"}},{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":199934,"title":"Introducing Basic Types of Hedge Funds","slug":"introducing-basic-types-of-hedge-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/199934"}},{"articleId":198378,"title":"Hedge Fund Fees to Expect with Your Investment","slug":"hedge-fund-fees-to-expect-with-your-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198378"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282184,"slug":"exchange-traded-funds-for-dummies","isbn":"9781119828839","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"amazon":{"default":"https://www.amazon.com/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/111982883X-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/exchange-traded-funds-for-dummies-3rd-edition-cover-9781119828839-203x255.jpg","width":203,"height":255},"title":"Exchange-Traded Funds For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"9023\">Russell Wild</b></b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <p><b>Russell Wild</b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-64f0ff8f0c508\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-64f0ff8f0cdce\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"One year","lifeExpectancySetFrom":"2023-08-31T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":178090},{"headers":{"creationTime":"2020-03-04T02:44:22+00:00","modifiedTime":"2023-08-31T20:19:17+00:00","timestamp":"2023-08-31T21:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Retirement","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34308"},"slug":"retirement","categoryId":34308}],"title":"How to Protect Your Retirement Money with Insurance","strippedTitle":"how to protect your retirement money with insurance","slug":"how-to-protect-your-retirement-money-with-insurance","canonicalUrl":"","seo":{"metaDescription":"Protecting your retirement funds from disaster is part of retirement planning. Use insurance to make sure your plan can withstand unexpected events.","noIndex":0,"noFollow":0},"content":"Protecting your retirement funds from disaster is a critical part of retirement planning. That’s where insurance comes in. You want to make sure your plan can withstand an unexpected event. Typically, health scares are the culprits in disrupting a plan, but home and auto accidents can be major expenses, too.\r\n<p class=\"article-tips tip\">Find your insurance declaration pages. These documents will tell you how much coverage you have, which you’ll need to evaluate your plan and make certain you’re protected.</p>\r\n\r\n<h2 id=\"tab1\" >Check property and casualty coverages</h2>\r\nIf you’re <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/retirement/retirement-planning-for-dummies-cheat-sheet-267342/\">planning for retirement</a>, it’s important that you have in place the right amount of automobile and homeowner's (or renter's) insurance coverage, in addition to healthcare coverage:\r\n<ul>\r\n \t<li><strong>Automobile insurance:</strong> Your car can be the source of enormous financial losses, not only to your vehicle but to someone else's vehicle and other personal property. Additionally, the financial hit from injuries can wipe out a financial plan overnight. If you’re nearing retirement age, you likely have significant assets to protect. Simply accepting the minimum coverage required by your state is likely not enough.</li>\r\n \t<li><strong>Homeowner's (or renter's) insurance:</strong> If you own your home, it might be one of the pieces of bedrock in your financial plan. If you don’t have rent or a mortgage, you’re well ahead of those who spend 30 percent of their budget for housing. Protecting your home from a devastating fire or other catastrophe is important. Don’t count on the insurance company to verify that you have enough coverage. Renters insurance can help safeguard your personal belongings.</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Insurance needs remain fairly unchanged as you near retirement—you need to protect your home whether you’re 34 or 64. But one factor that you might want to modify as you age is your deductible.</p>\r\nYour <em>deductible</em> is how much of a loss you’re responsible for in an accident. Let’s say your car sustains $1,500 in damage. If you’re young, you might not have the financial resources to handle a large hit and so you opt for a lower $250 deductible. The lower deductible comes at a cost, in the form of a higher monthly payment.\r\n\r\nAs you age, however, you probably have a larger financial reserve. One easy way to save money on insurance is to push up your deductible to $1,000 and save on your monthly premiums.\r\n\r\nLog into your insurance provider’s site, as shown, to see whether a higher deductible is available. You’ll also want to double-check that the limits are appropriate.\r\n\r\n[caption id=\"attachment_268818\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268818\" src=\"https://www.dummies.com/wp-content/uploads/retirement-insurance-policy-limits.jpg\" alt=\"insurance policy limits\" width=\"556\" height=\"313\" /> Check your homeowner's and auto policy limits to see if you can boost your deductible to lower your premiums.[/caption]\r\n<h2 id=\"tab2\" >Get ready for a rainy day: Umbrella insurance</h2>\r\nKnowing your coverage limits on your automotive and homeowner’s insurance policies unlocks the next phase of insurance. As you age and amass more money, you have more at risk from a big accident. Not only do you have more money to lose, you have less time to recover from a financial blow.\r\n\r\nAfter looking at your limits on your homeowner’s and automotive plans, you might see a disconnect. If your net worth exceeds your insurance limits, that’s a red flag. If you’ve accumulated a big nest egg, you don’t want to see it evaporate if you’re caught in a massive car pileup on the freeway. Similarly, if someone gets seriously hurt on your property, lawsuit damages can be enormous.\r\n\r\nHow do you protect yourself other than never leaving the house or never inviting someone over to visit? Enter <em>umbrella insurance,</em> which unlocks millions of dollars of extra coverage beyond what your homeowner’s and auto policies cover.\r\n<p class=\"article-tips tip\">Umbrella policies don’t kick in until the limits of your homeowner’s and automotive policies are exceeded. Because the umbrella policy doesn’t pay anything until your homeowner's or auto policy’s limit is topped, the rates on umbrella policies tend to be reasonable. It’s common to buy $1 million of coverage for $100 or $200 a year. It’s a small price to pay for such a large amount of protection and peace of mind.</p>\r\nHow much umbrella coverage to you need? You could figure it out yourself, but I like <a href=\"http://www.kiplinger.com/tool/insurance/T028-S002-how-much-umbrella-insurance-do-i-need/index.php\" target=\"_blank\" rel=\"noopener\">Kiplinger’s How Much Umbrella Insurance Do I Need? calculator</a>. The calculator, which is shown here, helps you buy just enough umbrella insurance to safeguard you from a major financial shock.\r\n\r\n[caption id=\"attachment_268817\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268817\" src=\"https://www.dummies.com/wp-content/uploads/retirement-umbrella-insurance.jpg\" alt=\"umbrella insurance\" width=\"556\" height=\"350\" /> Kiplinger’s umbrella insurance tool helps you protect yourself without paying too much.[/caption]\r\n\r\nTo use the calculator, start with your net worth and work backwards:\r\n<ol>\r\n \t<li><strong> Enter your net worth.\r\n</strong>Your <em>net worth</em> is the value of what you own minus what you owe.\r\n<p class=\"article-tips tip\">To err on the side of safety, consider buying an umbrella policy valued at your net worth. Yes, some of your money is protected against creditors, as you’ll see in Steps 2 and 3. But when you take the money out of protected accounts, such as retirement accounts, it’s exposed. This approach isn’t necessarily recommended, but it's a conservative way to go.</p>\r\n</li>\r\n \t<li><strong> Enter your home equity value.\r\n</strong>The <em>equity value</em> is the market value of your home minus mortgages or loans. Most states protect at least some of your home equity. The Kiplinger calculator can tabulate how much of your home equity is at risk.</li>\r\n \t<li><strong> Enter your retirement plan balances.</strong>\r\nEnter the value of your retirement plans, including 401(k), IRA, Roth IRA, SIMPLE IRA, and SEP IRA. Assets held in these accounts are protected from creditors.</li>\r\n \t<li><strong> Set a limit to your homeowner's and auto policies.\r\n</strong>Remember that your auto and homeowner’s liability coverage pays injury claims first. Most umbrella policy insurers will require your homeowner's liability limit to be $250,000 or higher. And you’ll likely need to have a per-person liability limit on your auto policy of $250,000 or more and $500,000 per accident.</li>\r\n</ol>\r\n<p class=\"article-tips tip\">You’ll usually get the most bang from your insurance buck if you raise your auto and homeowner's liability limits to the lowest required by your umbrella policy provider. Because you buy umbrella coverage in giant $1 million chunks, you can usually boost your total protection at a lower cost with an umbrella than with homeowner's or auto policy limits. Also, to save money on premiums, see if you can get your umbrella policy from the same company that provides your auto and homeowner’s policies. It’s also easier to coordinate payments from a single company.</p>\r\n\r\n<h2 id=\"tab3\" >Protect your family with life insurance</h2>\r\nThinking about all the things that can go wrong in life is no fun. That’s why I left the chapter on insurance for the end of the book. Planning for retirement should be fun. It gets you thinking about what’s most important in life and how to enjoy what you have for as long as possible.\r\n\r\nBut you need to prepare for unhappy events, too.\r\n<h3>Understanding the benefits of life insurance</h3>\r\nLife insurance isn’t for you. It’s for your beneficiaries. You buy a life insurance policy on your life with the idea that it will cover your financial role if you pass away. Life insurance is especially critical when you’re starting a family. If you’re the primary breadwinner and you die, imagine the financial hardship your family would suffer.\r\n\r\nTo combat this potentially cataclysmic crisis, you can buy a <em>term-life insurance</em> policy. By agreeing to pay an annual premium, if you were to die in a certain amount of time (or term), the insurance company agrees to pay out a pre-determined sum of money. The premium is the fee you pay to keep the policy active.\r\n<p class=\"article-tips tip\">Life insurance is there only to take care of people who count on you financially, after you die. If you’re not supporting anyone financially, you probably don’t need life insurance. Also, other forms of life insurance wrap savings and investment plans in with the death benefit. These plans are called whole-life plans. Whole-life plans might make sense for a subset of people, but they’re so complicated and potentially expensive that you should consult with an expert before buying one. Or you could just buy a term-life insurance policy and keep it simple.</p>\r\n\r\n<h3>Estimating how much life insurance you need</h3>\r\nIf you decide that you need life insurance, the next question is how much coverage you require. Some excellent online calculators, such as the following, can help you make the calculations:\r\n<ul>\r\n \t<li><a href=\"https://lifehappens.org/insurance-overview/life-insurance/calculate-your-needs\" target=\"_blank\" rel=\"noopener\"><strong>LifeHappens Calculate Your Needs calculator</strong></a><strong>: </strong>Steps you through the important questions you need to answer to decide how much life insurance coverage you need. As you can see in Figure 16-8, the site shows you the two variables that determine how much money your dependents would need if you died and in the future. The site helps you measure both.</li>\r\n</ul>\r\n[caption id=\"attachment_268816\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268816\" src=\"https://www.dummies.com/wp-content/uploads/retirement-lifehappens.jpg\" alt=\"life insurance tool\" width=\"556\" height=\"449\" /> LifeHappens provides many useful tools to help you see how much life insurance you need.[/caption]\r\n<ul>\r\n \t<li><a href=\"https://lifehappens.org/insurance-calculators/calculate-human-life-value/\" target=\"_blank\" rel=\"noopener\"><strong>LifeHappens Human Life Calculator</strong></a><strong>:</strong> Puts a price tag on your existence by showing how much of a financial blow your family would suffer if you died today. Putting a price tag on your life is another way to think about your life insurance needs, as you can see in the sidebar, “What’s a Life Worth?” The calculator is an eye-opening tabulation of what a human life is worth.</li>\r\n \t<li><a href=\"http://www.bankrate.com/calculators/insurance/life-insurance-calculator.aspx\" target=\"_blank\" rel=\"noopener\"><strong>Bankrate Life Insurance Calculator</strong></a><strong>: </strong>Looks at the question of how much life insurance you need in a slightly different way. Most life insurance calculators differ in their approach, so it’s a good idea to run your numbers through a few.</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Don’t fixate too much on how much life insurance you need. The biggest question is whether or not you need it. And if you do need it, don’t waste any time. Just buy it. An easy rule-of-thumb on how much you and your spouse collectively need is to buy? You’ll want a policy with a payout that’s 10 times your combined household income.</p>\r\n\r\n<h3>Buying life insurance</h3>\r\nTalk about a tough sell. How would you like to buy something that costs you money every year, doesn't benefit you personally, and pays out only if you die? Not exactly uplifting.\r\n\r\nThat’s why the moment someone hears that you’re interested in buying life insurance, sellers will come out of the woodwork to sell you a policy. Just search for <em>life insurance</em> online and you'll get life insurance ads on your screen for months.\r\n\r\nIf you do decide that you’re ready to buy a policy, first check with the carrier that provides your auto, homeowner’s, or umbrella coverage. Most also sell life insurance and provide a multi-policy discount. In addition, online insurance forums, such as LendingTree.com and SelectQuote, will shop your insurance needs against a network of bidders. You can then compare coverage and prices to get the best combination for you.","description":"Protecting your retirement funds from disaster is a critical part of retirement planning. That’s where insurance comes in. You want to make sure your plan can withstand an unexpected event. Typically, health scares are the culprits in disrupting a plan, but home and auto accidents can be major expenses, too.\r\n<p class=\"article-tips tip\">Find your insurance declaration pages. These documents will tell you how much coverage you have, which you’ll need to evaluate your plan and make certain you’re protected.</p>\r\n\r\n<h2 id=\"tab1\" >Check property and casualty coverages</h2>\r\nIf you’re <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/retirement/retirement-planning-for-dummies-cheat-sheet-267342/\">planning for retirement</a>, it’s important that you have in place the right amount of automobile and homeowner's (or renter's) insurance coverage, in addition to healthcare coverage:\r\n<ul>\r\n \t<li><strong>Automobile insurance:</strong> Your car can be the source of enormous financial losses, not only to your vehicle but to someone else's vehicle and other personal property. Additionally, the financial hit from injuries can wipe out a financial plan overnight. If you’re nearing retirement age, you likely have significant assets to protect. Simply accepting the minimum coverage required by your state is likely not enough.</li>\r\n \t<li><strong>Homeowner's (or renter's) insurance:</strong> If you own your home, it might be one of the pieces of bedrock in your financial plan. If you don’t have rent or a mortgage, you’re well ahead of those who spend 30 percent of their budget for housing. Protecting your home from a devastating fire or other catastrophe is important. Don’t count on the insurance company to verify that you have enough coverage. Renters insurance can help safeguard your personal belongings.</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Insurance needs remain fairly unchanged as you near retirement—you need to protect your home whether you’re 34 or 64. But one factor that you might want to modify as you age is your deductible.</p>\r\nYour <em>deductible</em> is how much of a loss you’re responsible for in an accident. Let’s say your car sustains $1,500 in damage. If you’re young, you might not have the financial resources to handle a large hit and so you opt for a lower $250 deductible. The lower deductible comes at a cost, in the form of a higher monthly payment.\r\n\r\nAs you age, however, you probably have a larger financial reserve. One easy way to save money on insurance is to push up your deductible to $1,000 and save on your monthly premiums.\r\n\r\nLog into your insurance provider’s site, as shown, to see whether a higher deductible is available. You’ll also want to double-check that the limits are appropriate.\r\n\r\n[caption id=\"attachment_268818\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268818\" src=\"https://www.dummies.com/wp-content/uploads/retirement-insurance-policy-limits.jpg\" alt=\"insurance policy limits\" width=\"556\" height=\"313\" /> Check your homeowner's and auto policy limits to see if you can boost your deductible to lower your premiums.[/caption]\r\n<h2 id=\"tab2\" >Get ready for a rainy day: Umbrella insurance</h2>\r\nKnowing your coverage limits on your automotive and homeowner’s insurance policies unlocks the next phase of insurance. As you age and amass more money, you have more at risk from a big accident. Not only do you have more money to lose, you have less time to recover from a financial blow.\r\n\r\nAfter looking at your limits on your homeowner’s and automotive plans, you might see a disconnect. If your net worth exceeds your insurance limits, that’s a red flag. If you’ve accumulated a big nest egg, you don’t want to see it evaporate if you’re caught in a massive car pileup on the freeway. Similarly, if someone gets seriously hurt on your property, lawsuit damages can be enormous.\r\n\r\nHow do you protect yourself other than never leaving the house or never inviting someone over to visit? Enter <em>umbrella insurance,</em> which unlocks millions of dollars of extra coverage beyond what your homeowner’s and auto policies cover.\r\n<p class=\"article-tips tip\">Umbrella policies don’t kick in until the limits of your homeowner’s and automotive policies are exceeded. Because the umbrella policy doesn’t pay anything until your homeowner's or auto policy’s limit is topped, the rates on umbrella policies tend to be reasonable. It’s common to buy $1 million of coverage for $100 or $200 a year. It’s a small price to pay for such a large amount of protection and peace of mind.</p>\r\nHow much umbrella coverage to you need? You could figure it out yourself, but I like <a href=\"http://www.kiplinger.com/tool/insurance/T028-S002-how-much-umbrella-insurance-do-i-need/index.php\" target=\"_blank\" rel=\"noopener\">Kiplinger’s How Much Umbrella Insurance Do I Need? calculator</a>. The calculator, which is shown here, helps you buy just enough umbrella insurance to safeguard you from a major financial shock.\r\n\r\n[caption id=\"attachment_268817\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268817\" src=\"https://www.dummies.com/wp-content/uploads/retirement-umbrella-insurance.jpg\" alt=\"umbrella insurance\" width=\"556\" height=\"350\" /> Kiplinger’s umbrella insurance tool helps you protect yourself without paying too much.[/caption]\r\n\r\nTo use the calculator, start with your net worth and work backwards:\r\n<ol>\r\n \t<li><strong> Enter your net worth.\r\n</strong>Your <em>net worth</em> is the value of what you own minus what you owe.\r\n<p class=\"article-tips tip\">To err on the side of safety, consider buying an umbrella policy valued at your net worth. Yes, some of your money is protected against creditors, as you’ll see in Steps 2 and 3. But when you take the money out of protected accounts, such as retirement accounts, it’s exposed. This approach isn’t necessarily recommended, but it's a conservative way to go.</p>\r\n</li>\r\n \t<li><strong> Enter your home equity value.\r\n</strong>The <em>equity value</em> is the market value of your home minus mortgages or loans. Most states protect at least some of your home equity. The Kiplinger calculator can tabulate how much of your home equity is at risk.</li>\r\n \t<li><strong> Enter your retirement plan balances.</strong>\r\nEnter the value of your retirement plans, including 401(k), IRA, Roth IRA, SIMPLE IRA, and SEP IRA. Assets held in these accounts are protected from creditors.</li>\r\n \t<li><strong> Set a limit to your homeowner's and auto policies.\r\n</strong>Remember that your auto and homeowner’s liability coverage pays injury claims first. Most umbrella policy insurers will require your homeowner's liability limit to be $250,000 or higher. And you’ll likely need to have a per-person liability limit on your auto policy of $250,000 or more and $500,000 per accident.</li>\r\n</ol>\r\n<p class=\"article-tips tip\">You’ll usually get the most bang from your insurance buck if you raise your auto and homeowner's liability limits to the lowest required by your umbrella policy provider. Because you buy umbrella coverage in giant $1 million chunks, you can usually boost your total protection at a lower cost with an umbrella than with homeowner's or auto policy limits. Also, to save money on premiums, see if you can get your umbrella policy from the same company that provides your auto and homeowner’s policies. It’s also easier to coordinate payments from a single company.</p>\r\n\r\n<h2 id=\"tab3\" >Protect your family with life insurance</h2>\r\nThinking about all the things that can go wrong in life is no fun. That’s why I left the chapter on insurance for the end of the book. Planning for retirement should be fun. It gets you thinking about what’s most important in life and how to enjoy what you have for as long as possible.\r\n\r\nBut you need to prepare for unhappy events, too.\r\n<h3>Understanding the benefits of life insurance</h3>\r\nLife insurance isn’t for you. It’s for your beneficiaries. You buy a life insurance policy on your life with the idea that it will cover your financial role if you pass away. Life insurance is especially critical when you’re starting a family. If you’re the primary breadwinner and you die, imagine the financial hardship your family would suffer.\r\n\r\nTo combat this potentially cataclysmic crisis, you can buy a <em>term-life insurance</em> policy. By agreeing to pay an annual premium, if you were to die in a certain amount of time (or term), the insurance company agrees to pay out a pre-determined sum of money. The premium is the fee you pay to keep the policy active.\r\n<p class=\"article-tips tip\">Life insurance is there only to take care of people who count on you financially, after you die. If you’re not supporting anyone financially, you probably don’t need life insurance. Also, other forms of life insurance wrap savings and investment plans in with the death benefit. These plans are called whole-life plans. Whole-life plans might make sense for a subset of people, but they’re so complicated and potentially expensive that you should consult with an expert before buying one. Or you could just buy a term-life insurance policy and keep it simple.</p>\r\n\r\n<h3>Estimating how much life insurance you need</h3>\r\nIf you decide that you need life insurance, the next question is how much coverage you require. Some excellent online calculators, such as the following, can help you make the calculations:\r\n<ul>\r\n \t<li><a href=\"https://lifehappens.org/insurance-overview/life-insurance/calculate-your-needs\" target=\"_blank\" rel=\"noopener\"><strong>LifeHappens Calculate Your Needs calculator</strong></a><strong>: </strong>Steps you through the important questions you need to answer to decide how much life insurance coverage you need. As you can see in Figure 16-8, the site shows you the two variables that determine how much money your dependents would need if you died and in the future. The site helps you measure both.</li>\r\n</ul>\r\n[caption id=\"attachment_268816\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-268816\" src=\"https://www.dummies.com/wp-content/uploads/retirement-lifehappens.jpg\" alt=\"life insurance tool\" width=\"556\" height=\"449\" /> LifeHappens provides many useful tools to help you see how much life insurance you need.[/caption]\r\n<ul>\r\n \t<li><a href=\"https://lifehappens.org/insurance-calculators/calculate-human-life-value/\" target=\"_blank\" rel=\"noopener\"><strong>LifeHappens Human Life Calculator</strong></a><strong>:</strong> Puts a price tag on your existence by showing how much of a financial blow your family would suffer if you died today. Putting a price tag on your life is another way to think about your life insurance needs, as you can see in the sidebar, “What’s a Life Worth?” The calculator is an eye-opening tabulation of what a human life is worth.</li>\r\n \t<li><a href=\"http://www.bankrate.com/calculators/insurance/life-insurance-calculator.aspx\" target=\"_blank\" rel=\"noopener\"><strong>Bankrate Life Insurance Calculator</strong></a><strong>: </strong>Looks at the question of how much life insurance you need in a slightly different way. Most life insurance calculators differ in their approach, so it’s a good idea to run your numbers through a few.</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Don’t fixate too much on how much life insurance you need. The biggest question is whether or not you need it. And if you do need it, don’t waste any time. Just buy it. An easy rule-of-thumb on how much you and your spouse collectively need is to buy? You’ll want a policy with a payout that’s 10 times your combined household income.</p>\r\n\r\n<h3>Buying life insurance</h3>\r\nTalk about a tough sell. How would you like to buy something that costs you money every year, doesn't benefit you personally, and pays out only if you die? Not exactly uplifting.\r\n\r\nThat’s why the moment someone hears that you’re interested in buying life insurance, sellers will come out of the woodwork to sell you a policy. Just search for <em>life insurance</em> online and you'll get life insurance ads on your screen for months.\r\n\r\nIf you do decide that you’re ready to buy a policy, first check with the carrier that provides your auto, homeowner’s, or umbrella coverage. Most also sell life insurance and provide a multi-policy discount. In addition, online insurance forums, such as LendingTree.com and SelectQuote, will shop your insurance needs against a network of bidders. You can then compare coverage and prices to get the best combination for you.","blurb":"","authors":[{"authorId":33279,"name":"Matthew Krantz","slug":"matthew-krantz","description":" <p><b>Matt Krantz</b> is a nationally known financial journalist who specializes in investing topics. He&#39;s personal finance and management editor at <i>Investor&#39;s Business Daily.</i> He&#39;s also worked in the financial industry and covered markets and investing for <i>USA TODAY.</i> His writing on financial topics has also appeared in <i>Money</i> magazine, <i> Kiplinger&#39;s</i>, and <i>Men&#39;s Health</i>. Krantz is the author of <i>Fundamental Analysis For Dummies</i> and co&#45;author of <i>Investment Banking For Dummies.</i> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/33279"}}],"primaryCategoryTaxonomy":{"categoryId":34308,"title":"Retirement","slug":"retirement","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34308"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Check property and casualty coverages","target":"#tab1"},{"label":"Get ready for a rainy day: Umbrella insurance","target":"#tab2"},{"label":"Protect your family with life insurance","target":"#tab3"}],"relatedArticles":{"fromBook":[{"articleId":268853,"title":"How to Manage Your Pension","slug":"how-to-manage-your-pension","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268853"}},{"articleId":268848,"title":"How to Take Money Out of Your IRA","slug":"how-to-take-money-out-of-your-ira","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268848"}},{"articleId":268843,"title":"How to Manage Your IRA Contributions","slug":"how-to-manage-your-ira-contributions","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268843"}},{"articleId":268838,"title":"How to Get Online with Your IRA Provider","slug":"how-to-get-online-with-your-ira-provider","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268838"}},{"articleId":268829,"title":"How to Get Online Access to Your 401(k)","slug":"how-to-get-online-access-to-your-401k","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268829"}}],"fromCategory":[{"articleId":298305,"title":"RRSPs & TFSAs For Canadians For Dummies Cheat Sheet","slug":"rrsps-tfsas-for-canadians-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/298305"}},{"articleId":288529,"title":"401(k)s and IRAs For Dummies Cheat Sheet","slug":"401ks-and-iras-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/288529"}},{"articleId":268853,"title":"How to Manage Your Pension","slug":"how-to-manage-your-pension","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268853"}},{"articleId":268848,"title":"How to Take Money Out of Your IRA","slug":"how-to-take-money-out-of-your-ira","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268848"}},{"articleId":268843,"title":"How to Manage Your IRA Contributions","slug":"how-to-manage-your-ira-contributions","categoryList":["business-careers-money","personal-finance","retirement"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/268843"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281850,"slug":"retirement-planning-for-dummies","isbn":"9781119627579","categoryList":["business-careers-money","personal-finance","retirement"],"amazon":{"default":"https://www.amazon.com/gp/product/1119627575/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119627575/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119627575-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119627575/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119627575/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/retirement-planning-for-dummies-cover-9781119627579-203x255.jpg","width":203,"height":255},"title":"Retirement Planning For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b>Matt Krantz</b> is a nationally known financial journalist who specializes in investing topics. He&#39;s personal finance and management editor at <i>Investor&#39;s Business Daily.</i> He&#39;s also worked in the financial industry and covered markets and investing for <i>USA TODAY.</i> His writing on financial topics has also appeared in <i>Money</i> magazine, <i> Kiplinger&#39;s</i>, and <i>Men&#39;s Health</i>. Krantz is the author of <i>Fundamental Analysis For Dummies</i> and co&#45;author of <i>Investment Banking For Dummies.</i></p>","authors":[{"authorId":33279,"name":"Matthew Krantz","slug":"matthew-krantz","description":" <p><b>Matt Krantz</b> is a nationally known financial journalist who specializes in investing topics. He&#39;s personal finance and management editor at <i>Investor&#39;s Business Daily.</i> He&#39;s also worked in the financial industry and covered markets and investing for <i>USA TODAY.</i> His writing on financial topics has also appeared in <i>Money</i> magazine, <i> Kiplinger&#39;s</i>, and <i>Men&#39;s Health</i>. Krantz is the author of <i>Fundamental Analysis For Dummies</i> and co&#45;author of <i>Investment Banking For Dummies.</i> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/33279"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;retirement&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119627579&quot;]}]\" id=\"du-slot-64f0ff8ef34ac\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;retirement&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119627579&quot;]}]\" id=\"du-slot-64f0ff8ef3d46\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"One year","lifeExpectancySetFrom":"2023-08-31T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":268815},{"headers":{"creationTime":"2016-03-26T15:50:03+00:00","modifiedTime":"2023-08-31T14:02:48+00:00","timestamp":"2023-08-31T15:01:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"General Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"},"slug":"general-personal-finance","categoryId":34311}],"title":"Borrowing Money for Your Child's College Education","strippedTitle":"borrowing money for your child's college education","slug":"borrowing-money-for-your-childs-college-education","canonicalUrl":"","seo":{"metaDescription":"After you've tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust her borrowing options before you ","noIndex":0,"noFollow":0},"content":"<p class=\"ReviewDate\">After you've tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust <i>her</i> borrowing options before you consider taking on any debt to pay for her college education. Putting yourself into debt to pay for your child's college education may have disastrous effects on your financial future — after all, there is no such thing as financial aid for your retirement.</p>\r\n<p class=\"Remember\">The best way to fund college costs, if borrowing is necessary, is to have your child borrow the money herself. Through federal student loan programs and financing programs available through various institutions, students have a number of attractive options available to them to finance college costs. Help your student apply for financial aid and exhaust all other resources and options prior to going into debt to pay for her college education.</p>\r\n<p>Your child can participate in work-study programs; do part-time work; acquire student loans, grants, and scholarships; attend college part-time while working full-time; or join AmeriCorps, the Peace Corps, or the military, all of which offer financial benefits for education.</p>\r\n<h2 id=\"tab1\" >Tuition borrowing options</h2>\r\n<p>If you borrow money for your child's college education, consider the list of primary resources:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Federal PLUS loan:</b> This loan is the best of all these options. The Parent Loan for Undergraduate Students (PLUS) is a popular, accessible, and reasonably priced loan where parents (with decent credit) can borrow up to the full cost of a dependent student's education minus any other financial aid for which the student qualifies. Repayment must begin within 60 days of receipt, and you may have up to ten years to repay the loan plus interest. For additional information visit the <a href=\"http://www.collegeboard.org/\" target=\"blank\" rel=\"noopener\">College Board</a> online or call toll-free at 800-891-1253.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Home equity line of credit:</b> The interest rate on the loan will be high, and borrowing against your home equity can put your home at risk of foreclosure.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>401(k) plan loan:</b> If your 401(k) plan has a loan feature, the maximum amount you can borrow is the lesser of $50,000 or 50 percent of your vested account balance. Contact your 401(k) administrator for details.</p>\r\n<p class=\"child-para\">When you borrow money from your 401(k), that money is no longer invested. Even if you repay interest on this loan, you aren't getting the full benefit of your 401(k) plan investments. Also, the money you pull out of the 401(k) plan as a loan is pre-tax dollars, but the money you repay the loan with is after-tax. Wham! If you change employers while the loan is still outstanding and don't pay the loan in full, it's subject to a 10% early withdrawal penalty and taxation. Double wham!</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Unsecured loan from your bank:</b> Also known as a <i>signature loan,</i> this loan is often the most expensive. The bank charges a much higher interest rate because no asset, such as a house, is securing this loan. These loans are often difficult to qualify for unless you have impeccable credit.</p>\r\n </li>\r\n</ul>\r\n<p>Use the following table to organize possible financial-aid resources. Make a check in the left column if a particular source may be an option to pay for your child's college education, and if so, list the available funds in the column on the right.</p>\r\n<table>\r\n<caption>\r\nTuition Borrowing Options for Parents\r\n</caption>\r\n<tr>\r\n<th>Potential Option?</th>\r\n<th>Source</th>\r\n<th>Available Funds</th>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Federal PLUS Loan</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Home equity line of credit</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>401(k) plan loan</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Unsecured loan from bank</td>\r\n<td>$</td>\r\n</tr>\r\n</table>\r\n<h2 id=\"tab2\" >Federal student aid programs</h2>\r\n<p>Federal financial aid programs are intended to make up the difference between what your family can afford to pay and what college costs — and this aid is available to everyone. Although you may feel that your income level is too high and your child isn't eligible for financial aid, most Americans do qualify for aid in some way.</p>\r\n<p>With all loans, one of the primary issues to consider is the loan's cost — that is, the interest and any loan acquisition fees. The least expensive loan is general the one with the lowest interest rate. Here's a look at the cheapest federal student aid programs:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Perkins loans </b>have the strictest needs-based requirements. A student may borrow up to $5,500 per year, not to exceed $27,500. The current interest rate is 5 percent, and payments don't commence until the student graduates.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Subsidized Stafford loans </b>are also needs-based loans. A student may borrow up to $3,500 in the first year of undergraduate studies. This limit increases through college. As of this writing, the interest rate is 6.8 percent per year. The federal government, however, actually pays the interest due on the loan until the student is required to begin making payments six months after graduation. The loan must be paid over ten years.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Unsubsidized Stafford loans</b> are <i>not</i> needs based loans. The amount that you may borrow is identical to the Subsidized Stafford loan program if the student is your dependent. If the student is independent, however, he may borrow up to $5,500 initially with the limit increasing through the years of college. The interest rate on this type of loan is 6.8 percent annually, as of this writing. <i>But,</i> the federal government doesn't pay any of the interest on behalf of the student. Repayment begins six months after graduation, and the loan must be repaid over ten years.</p>\r\n </li>\r\n</ul>\r\n<p>To get the most recent rates on student loans and detailed instructions on how to obtain these loans, visit the <a href=\"http://www.collegeboard.org/\" target=\"_blank\" rel=\"noopener\">College Board</a>.</p>\r\n<h2 id=\"tab3\" >Setting payment expectations for your college student</h2>\r\n<p>If you borrow money for your child's college education, communicate the expectations you have regarding paying for college and help your student set reasonable expectations. You may feel very strongly that your child participate in the financial responsibilities involved in obtaining this education. One strategy is to create a collaborative agreement between parent and child:</p>\r\n<div class=\"imageBlock\" style=\"width:374px;\"><img src=\"https://www.dummies.com/wp-content/uploads/353818.image0.jpg\" width=\"374\" height=\"400\" alt=\"Example of a promissory note for your student's college education.\"/><div class=\"imageCaption\">Example of a promissory note for your student's college education.</div></div>\r\n<p>Benefits of the kind of collaborative arrangement include the following:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\">Your child must apply himself and show a good faith effort, or you won't pay anything toward his college education.</p>\r\n </li>\r\n <li><p class=\"first-para\">If your student drops out of school, he's on his own.</p>\r\n </li>\r\n <li><p class=\"first-para\">If your child applies himself and achieves a B average or better, you will repay 80 to 100 percent of the college costs.</p>\r\n </li>\r\n <li><p class=\"first-para\">You don't have to start repaying these loans until six months after your student graduates, which allows you additional time to accumulate funds to repay the debt or to adjust your monthly cash flow in order to be able to more comfortably pay the debts.</p>\r\n </li>\r\n</ul>","description":"<p class=\"ReviewDate\">After you've tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust <i>her</i> borrowing options before you consider taking on any debt to pay for her college education. Putting yourself into debt to pay for your child's college education may have disastrous effects on your financial future — after all, there is no such thing as financial aid for your retirement.</p>\r\n<p class=\"Remember\">The best way to fund college costs, if borrowing is necessary, is to have your child borrow the money herself. Through federal student loan programs and financing programs available through various institutions, students have a number of attractive options available to them to finance college costs. Help your student apply for financial aid and exhaust all other resources and options prior to going into debt to pay for her college education.</p>\r\n<p>Your child can participate in work-study programs; do part-time work; acquire student loans, grants, and scholarships; attend college part-time while working full-time; or join AmeriCorps, the Peace Corps, or the military, all of which offer financial benefits for education.</p>\r\n<h2 id=\"tab1\" >Tuition borrowing options</h2>\r\n<p>If you borrow money for your child's college education, consider the list of primary resources:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Federal PLUS loan:</b> This loan is the best of all these options. The Parent Loan for Undergraduate Students (PLUS) is a popular, accessible, and reasonably priced loan where parents (with decent credit) can borrow up to the full cost of a dependent student's education minus any other financial aid for which the student qualifies. Repayment must begin within 60 days of receipt, and you may have up to ten years to repay the loan plus interest. For additional information visit the <a href=\"http://www.collegeboard.org/\" target=\"blank\" rel=\"noopener\">College Board</a> online or call toll-free at 800-891-1253.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Home equity line of credit:</b> The interest rate on the loan will be high, and borrowing against your home equity can put your home at risk of foreclosure.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>401(k) plan loan:</b> If your 401(k) plan has a loan feature, the maximum amount you can borrow is the lesser of $50,000 or 50 percent of your vested account balance. Contact your 401(k) administrator for details.</p>\r\n<p class=\"child-para\">When you borrow money from your 401(k), that money is no longer invested. Even if you repay interest on this loan, you aren't getting the full benefit of your 401(k) plan investments. Also, the money you pull out of the 401(k) plan as a loan is pre-tax dollars, but the money you repay the loan with is after-tax. Wham! If you change employers while the loan is still outstanding and don't pay the loan in full, it's subject to a 10% early withdrawal penalty and taxation. Double wham!</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Unsecured loan from your bank:</b> Also known as a <i>signature loan,</i> this loan is often the most expensive. The bank charges a much higher interest rate because no asset, such as a house, is securing this loan. These loans are often difficult to qualify for unless you have impeccable credit.</p>\r\n </li>\r\n</ul>\r\n<p>Use the following table to organize possible financial-aid resources. Make a check in the left column if a particular source may be an option to pay for your child's college education, and if so, list the available funds in the column on the right.</p>\r\n<table>\r\n<caption>\r\nTuition Borrowing Options for Parents\r\n</caption>\r\n<tr>\r\n<th>Potential Option?</th>\r\n<th>Source</th>\r\n<th>Available Funds</th>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Federal PLUS Loan</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Home equity line of credit</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>401(k) plan loan</td>\r\n<td>$</td>\r\n</tr>\r\n<tr>\r\n<td>\r\n</td>\r\n<td>Unsecured loan from bank</td>\r\n<td>$</td>\r\n</tr>\r\n</table>\r\n<h2 id=\"tab2\" >Federal student aid programs</h2>\r\n<p>Federal financial aid programs are intended to make up the difference between what your family can afford to pay and what college costs — and this aid is available to everyone. Although you may feel that your income level is too high and your child isn't eligible for financial aid, most Americans do qualify for aid in some way.</p>\r\n<p>With all loans, one of the primary issues to consider is the loan's cost — that is, the interest and any loan acquisition fees. The least expensive loan is general the one with the lowest interest rate. Here's a look at the cheapest federal student aid programs:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\"><b>Perkins loans </b>have the strictest needs-based requirements. A student may borrow up to $5,500 per year, not to exceed $27,500. The current interest rate is 5 percent, and payments don't commence until the student graduates.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Subsidized Stafford loans </b>are also needs-based loans. A student may borrow up to $3,500 in the first year of undergraduate studies. This limit increases through college. As of this writing, the interest rate is 6.8 percent per year. The federal government, however, actually pays the interest due on the loan until the student is required to begin making payments six months after graduation. The loan must be paid over ten years.</p>\r\n </li>\r\n <li><p class=\"first-para\"><b>Unsubsidized Stafford loans</b> are <i>not</i> needs based loans. The amount that you may borrow is identical to the Subsidized Stafford loan program if the student is your dependent. If the student is independent, however, he may borrow up to $5,500 initially with the limit increasing through the years of college. The interest rate on this type of loan is 6.8 percent annually, as of this writing. <i>But,</i> the federal government doesn't pay any of the interest on behalf of the student. Repayment begins six months after graduation, and the loan must be repaid over ten years.</p>\r\n </li>\r\n</ul>\r\n<p>To get the most recent rates on student loans and detailed instructions on how to obtain these loans, visit the <a href=\"http://www.collegeboard.org/\" target=\"_blank\" rel=\"noopener\">College Board</a>.</p>\r\n<h2 id=\"tab3\" >Setting payment expectations for your college student</h2>\r\n<p>If you borrow money for your child's college education, communicate the expectations you have regarding paying for college and help your student set reasonable expectations. You may feel very strongly that your child participate in the financial responsibilities involved in obtaining this education. One strategy is to create a collaborative agreement between parent and child:</p>\r\n<div class=\"imageBlock\" style=\"width:374px;\"><img src=\"https://www.dummies.com/wp-content/uploads/353818.image0.jpg\" width=\"374\" height=\"400\" alt=\"Example of a promissory note for your student's college education.\"/><div class=\"imageCaption\">Example of a promissory note for your student's college education.</div></div>\r\n<p>Benefits of the kind of collaborative arrangement include the following:</p>\r\n<ul class=\"level-one\">\r\n <li><p class=\"first-para\">Your child must apply himself and show a good faith effort, or you won't pay anything toward his college education.</p>\r\n </li>\r\n <li><p class=\"first-para\">If your student drops out of school, he's on his own.</p>\r\n </li>\r\n <li><p class=\"first-para\">If your child applies himself and achieves a B average or better, you will repay 80 to 100 percent of the college costs.</p>\r\n </li>\r\n <li><p class=\"first-para\">You don't have to start repaying these loans until six months after your student graduates, which allows you additional time to accumulate funds to repay the debt or to adjust your monthly cash flow in order to be able to more comfortably pay the debts.</p>\r\n </li>\r\n</ul>","blurb":"","authors":[{"authorId":9811,"name":"Sheryl Garrett","slug":"sheryl-garrett","description":" <b>Sheryl Garrett</b> is a financial advisor, author, and speaker. She founded the Garrett Planning Network and is the author of <i>Personal Finance Workbook For Dummies</i>. <p><b>Sue Hoppin</b> is the Deputy Director for Spouse Outreach at the Military Officers Association of America. In 2007, Military Spouse magazine placed Sue on their 2007 Who's Who of Military Spouses list.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9811"}}],"primaryCategoryTaxonomy":{"categoryId":34311,"title":"General Personal Finance","slug":"general-personal-finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Tuition borrowing options","target":"#tab1"},{"label":"Federal student aid programs","target":"#tab2"},{"label":"Setting payment expectations for your college student","target":"#tab3"}],"relatedArticles":{"fromBook":[{"articleId":208422,"title":"Personal Finance Workbook For Dummies Cheat Sheet","slug":"personal-finance-workbook-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208422"}},{"articleId":197146,"title":"Creating Files to Organize Tax Records","slug":"creating-files-to-organize-tax-records","categoryList":["business-careers-money","personal-finance","taxes"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/197146"}},{"articleId":197098,"title":"Automatic Investment Programs for Retirement","slug":"establishing-automatic-investment-programs-for-retirement","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/197098"}},{"articleId":181915,"title":"How to Wipe Out Credit Card Debt","slug":"how-to-wipe-out-credit-card-debt","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/181915"}},{"articleId":181909,"title":"Considering Your Financial Future","slug":"considering-your-financial-future","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/181909"}}],"fromCategory":[{"articleId":298881,"title":"34 Ways To Save Money on Utilities","slug":"34-ways-to-save-money-on-utilities","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/298881"}},{"articleId":288537,"title":"Financial Security For Dummies Cheat Sheet","slug":"financial-security-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/288537"}},{"articleId":259430,"title":"How to Decrease Debt","slug":"how-to-decrease-debt","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259430"}},{"articleId":259420,"title":"How to Determine Your Financial Net Worth","slug":"how-to-determine-your-financial-net-worth","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259420"}},{"articleId":251786,"title":"The Impact of Investing for College Costs","slug":"impact-investing-college-costs","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251786"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282461,"slug":"personal-finance-workbook-for-dummies-2nd-edition","isbn":"9781118106259","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"amazon":{"default":"https://www.amazon.com/gp/product/1118106253/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1118106253/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1118106253-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1118106253/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1118106253/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/personal-finance-workbook-for-dummies-2nd-edition-cover-9781118106259-203x255.jpg","width":203,"height":255},"title":"Personal Finance Workbook For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<b data-author-id=\"9811\">Sheryl Garrett</b> is a Certified Financial Planner professional and founder of The Garrett Planning Network, Inc.","authors":[{"authorId":9811,"name":"Sheryl Garrett","slug":"sheryl-garrett","description":" <b>Sheryl Garrett</b> is a financial advisor, author, and speaker. She founded the Garrett Planning Network and is the author of <i>Personal Finance Workbook For Dummies</i>. <p><b>Sue Hoppin</b> is the Deputy Director for Spouse Outreach at the Military Officers Association of America. In 2007, Military Spouse magazine placed Sue on their 2007 Who's Who of Military Spouses list.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9811"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118106259&quot;]}]\" id=\"du-slot-64f0ab304a626\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118106259&quot;]}]\" id=\"du-slot-64f0ab304ad7f\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"One year","lifeExpectancySetFrom":"2023-08-31T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":170884},{"headers":{"creationTime":"2017-10-25T10:50:38+00:00","modifiedTime":"2023-08-31T13:58:17+00:00","timestamp":"2023-08-31T15:01:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"General Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"},"slug":"general-personal-finance","categoryId":34311}],"title":"Why Analysts Are Important to Traders","strippedTitle":"why analysts are important to traders","slug":"analysts-important-traders","canonicalUrl":"","seo":{"metaDescription":"No matter which analyst’s report you’re reading, you must remember that the analyst’s primary income is coming either from the brokerage house or the large inst","noIndex":0,"noFollow":0},"content":"No matter which analyst’s report you’re reading, you must remember that the analyst’s primary income is coming either from the brokerage house or the large institutional clients that he or she serves. Analysts rate stocks on whether you should consider purchasing them, but no standardized rating system exists. The three most common breakdowns that you can expect to see are shown here.\r\n<table width=\"551\"><caption>Common Stock Recommendations from Analysts</caption>\r\n<thead>\r\n<tr>\r\n<td><strong>Analysis by Company A</strong></td>\r\n<td>vAnalysis by Company B</strong></td>\r\n<td><strong>Analysis by Company C</strong></td>\r\n</tr>\r\n</thead>\r\n<tbody>\r\n<tr>\r\n<td>Buy</td>\r\n<td>Strong buy</td>\r\n<td>Recommended list</td>\r\n</tr>\r\n<tr>\r\n<td>Outperform</td>\r\n<td>Buy</td>\r\n<td>Trading buy</td>\r\n</tr>\r\n<tr>\r\n<td>Neutral</td>\r\n<td>Hold</td>\r\n<td>Market outperformer</td>\r\n</tr>\r\n<tr>\r\n<td>Underperform</td>\r\n<td>Sell</td>\r\n<td>Market perform</td>\r\n</tr>\r\n<tr>\r\n<td>Avoid</td>\r\n<td></td>\r\n<td>Market underperformer</td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nYou can see from this table that you must understand how a company’s analysts rate stocks for that company’s recommendations to have any value. Company A’s <em>Buy</em> recommendation is its highest, but Company B uses <em>Strong buy</em> for its highest rating, and Company C uses <em>Recommended list</em> for its top choice. Merely seeing that a stock is recommended as a Buy by a particular analyst means little if you don’t know which rating system the analyst is using.\r\n<p class=\"article-tips warning\">Unfortunately, when it comes to stock analysts, if the information is free, it’s probably no better than that free lunch you’re always looking to find. Someone has to pay the analyst, and if it isn’t you, you must find out who is footing the bill before you use that advice to make decisions.</p>\r\n<p class=\"article-tips remember\">The best way to use analysts’ reports is to think of them as just one tool in your bucket of trading tools. Analysts are one good way to find out about an industry or a stock, but they’re not the final word about what you need to do. Only your own research using fundamental and technical analysis can help you make your investment decisions.</p>\r\n\r\n<h2 id=\"tab1\" >Tracking how a company’s doing</h2>\r\nAnalysts are good resources for finding historical data about how a company or industry is doing. Their reports usually summarize at least five years of data and frequently provide a historical perspective for the industry and the company that goes back many more years. In addition, analysts make projections about the earnings potential of the company they’re analyzing and indicate why they believe those projections by including information about new products being developed or currently being tested at various stages of market development.\r\n<p class=\"article-tips tip\">These reports help you track how a company is doing so you can find the gems that may indicate when to expect a company to break out of a current trading trend.</p>\r\nFor example, if an analyst covering a pharmaceutical company mentions that a new drug is under consideration by the Food and Drug Administration, you may look for news stories about the status of that drug and monitor the stock for indications that drug approval may soon be announced. Watching the technical charts may help you jump in at just the right time and catch the upward trend as positive news is announced. Stocks usually start to move in advance of news.\r\n<h2 id=\"tab2\" >Providing access to analyst calls</h2>\r\nIn addition to reading reports, you can track companies by listening in on <em>analyst calls.</em> Some calls are sponsored by the companies themselves to review annual or quarterly results, and others are sponsored by independent analysts.\r\n<h3>Company‐sponsored calls</h3>\r\nAnalyst calls sponsored by companies more often are earnings conference calls primarily for institutional investors and Wall Street analysts. They occur on either a quarterly, semiannual, or annual basis and can be the richest sources of information concerning a company’s fundamentals and future prospects.\r\n\r\nSenior management, which usually includes the chief executive officer (CEO), president, and chief financial officer (CFO), talks about their financial reports and then answers questions during these calls. The calls sometimes are scheduled to coincide with announcements of major changes in a company’s leadership or other breaking news about the company.\r\n\r\nAfter a formal statement, senior management answers questions from analysts. That’s when you usually can get the most up‐to‐date information about the company and how management views its financial performance and projections.\r\n<p class=\"article-tips tip\">Access to these calls used to be limited to professional analysts and institutional investors, but today more than 97 percent of companies that sponsor analyst calls open them to the media and individual investors, according to a survey conducted by the National Investor Relations Institute.</p>\r\nThis change primarily is credited to the SEC’s Fair Disclosure (FD) Regulation, which requires companies to make public all major announcements that can impact the value of the stock within 24 hours of informing any company outsiders. This rule helps level the information playing field for individual investors.\r\n\r\nAnalysts no longer can count on getting two or three days of lead time on major announcements, which heretofore helped them inform major investors about company news. Often that amount of lead time enabled analysts to recommend buy or sell decisions to their key clients, but that same practice hurt small investors and traders who weren’t privy to the news.\r\n\r\nSome complain this new rule actually hurt the flow of information because companies clammed up in private conversations with analysts, making it harder for the analysts to write their investigative reports. Since the regulation first took effect in 2000, the fair disclosure rule has helped to level the information playing field.\r\n<h3>Independent analyst–sponsored calls</h3>\r\nFirms that provide independent analysis also sponsor calls primarily for their wealthy and institutional clients. During these calls, analysts often discuss breaking news about a company or an industry that they follow. Doing so gives their clients an opportunity to discuss key concerns directly with the analysts. Unless you’re a client, opportunities for listening in on these calls are rare.","description":"No matter which analyst’s report you’re reading, you must remember that the analyst’s primary income is coming either from the brokerage house or the large institutional clients that he or she serves. Analysts rate stocks on whether you should consider purchasing them, but no standardized rating system exists. The three most common breakdowns that you can expect to see are shown here.\r\n<table width=\"551\"><caption>Common Stock Recommendations from Analysts</caption>\r\n<thead>\r\n<tr>\r\n<td><strong>Analysis by Company A</strong></td>\r\n<td>vAnalysis by Company B</strong></td>\r\n<td><strong>Analysis by Company C</strong></td>\r\n</tr>\r\n</thead>\r\n<tbody>\r\n<tr>\r\n<td>Buy</td>\r\n<td>Strong buy</td>\r\n<td>Recommended list</td>\r\n</tr>\r\n<tr>\r\n<td>Outperform</td>\r\n<td>Buy</td>\r\n<td>Trading buy</td>\r\n</tr>\r\n<tr>\r\n<td>Neutral</td>\r\n<td>Hold</td>\r\n<td>Market outperformer</td>\r\n</tr>\r\n<tr>\r\n<td>Underperform</td>\r\n<td>Sell</td>\r\n<td>Market perform</td>\r\n</tr>\r\n<tr>\r\n<td>Avoid</td>\r\n<td></td>\r\n<td>Market underperformer</td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nYou can see from this table that you must understand how a company’s analysts rate stocks for that company’s recommendations to have any value. Company A’s <em>Buy</em> recommendation is its highest, but Company B uses <em>Strong buy</em> for its highest rating, and Company C uses <em>Recommended list</em> for its top choice. Merely seeing that a stock is recommended as a Buy by a particular analyst means little if you don’t know which rating system the analyst is using.\r\n<p class=\"article-tips warning\">Unfortunately, when it comes to stock analysts, if the information is free, it’s probably no better than that free lunch you’re always looking to find. Someone has to pay the analyst, and if it isn’t you, you must find out who is footing the bill before you use that advice to make decisions.</p>\r\n<p class=\"article-tips remember\">The best way to use analysts’ reports is to think of them as just one tool in your bucket of trading tools. Analysts are one good way to find out about an industry or a stock, but they’re not the final word about what you need to do. Only your own research using fundamental and technical analysis can help you make your investment decisions.</p>\r\n\r\n<h2 id=\"tab1\" >Tracking how a company’s doing</h2>\r\nAnalysts are good resources for finding historical data about how a company or industry is doing. Their reports usually summarize at least five years of data and frequently provide a historical perspective for the industry and the company that goes back many more years. In addition, analysts make projections about the earnings potential of the company they’re analyzing and indicate why they believe those projections by including information about new products being developed or currently being tested at various stages of market development.\r\n<p class=\"article-tips tip\">These reports help you track how a company is doing so you can find the gems that may indicate when to expect a company to break out of a current trading trend.</p>\r\nFor example, if an analyst covering a pharmaceutical company mentions that a new drug is under consideration by the Food and Drug Administration, you may look for news stories about the status of that drug and monitor the stock for indications that drug approval may soon be announced. Watching the technical charts may help you jump in at just the right time and catch the upward trend as positive news is announced. Stocks usually start to move in advance of news.\r\n<h2 id=\"tab2\" >Providing access to analyst calls</h2>\r\nIn addition to reading reports, you can track companies by listening in on <em>analyst calls.</em> Some calls are sponsored by the companies themselves to review annual or quarterly results, and others are sponsored by independent analysts.\r\n<h3>Company‐sponsored calls</h3>\r\nAnalyst calls sponsored by companies more often are earnings conference calls primarily for institutional investors and Wall Street analysts. They occur on either a quarterly, semiannual, or annual basis and can be the richest sources of information concerning a company’s fundamentals and future prospects.\r\n\r\nSenior management, which usually includes the chief executive officer (CEO), president, and chief financial officer (CFO), talks about their financial reports and then answers questions during these calls. The calls sometimes are scheduled to coincide with announcements of major changes in a company’s leadership or other breaking news about the company.\r\n\r\nAfter a formal statement, senior management answers questions from analysts. That’s when you usually can get the most up‐to‐date information about the company and how management views its financial performance and projections.\r\n<p class=\"article-tips tip\">Access to these calls used to be limited to professional analysts and institutional investors, but today more than 97 percent of companies that sponsor analyst calls open them to the media and individual investors, according to a survey conducted by the National Investor Relations Institute.</p>\r\nThis change primarily is credited to the SEC’s Fair Disclosure (FD) Regulation, which requires companies to make public all major announcements that can impact the value of the stock within 24 hours of informing any company outsiders. This rule helps level the information playing field for individual investors.\r\n\r\nAnalysts no longer can count on getting two or three days of lead time on major announcements, which heretofore helped them inform major investors about company news. Often that amount of lead time enabled analysts to recommend buy or sell decisions to their key clients, but that same practice hurt small investors and traders who weren’t privy to the news.\r\n\r\nSome complain this new rule actually hurt the flow of information because companies clammed up in private conversations with analysts, making it harder for the analysts to write their investigative reports. Since the regulation first took effect in 2000, the fair disclosure rule has helped to level the information playing field.\r\n<h3>Independent analyst–sponsored calls</h3>\r\nFirms that provide independent analysis also sponsor calls primarily for their wealthy and institutional clients. During these calls, analysts often discuss breaking news about a company or an industry that they follow. Doing so gives their clients an opportunity to discuss key concerns directly with the analysts. Unless you’re a client, opportunities for listening in on these calls are rare.","blurb":"","authors":[{"authorId":9240,"name":"Joe Duarte","slug":"joe-duarte","description":" <p><b>Dr. Joe Duarte</b> is a financial &#173;writer, private investor and trader, and former money manager/president of River Willow Capital Management. In addition to <i>Options Trading For Dummies</i>, he is the author of <i>Trading Futures For Dummies</i> and <i>Market Timing For Dummies</i>. Visit his website at joeduarteinthemoneyoptions.com</p> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9240"}}],"primaryCategoryTaxonomy":{"categoryId":34311,"title":"General Personal Finance","slug":"general-personal-finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Tracking how a company’s doing","target":"#tab1"},{"label":"Providing access to analyst calls","target":"#tab2"}],"relatedArticles":{"fromBook":[{"articleId":245740,"title":"Understanding Countertrend Trading Systems","slug":"understanding-countertrend-trading-systems","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/245740"}},{"articleId":245737,"title":"Understanding Trend‐Following Trading Systems","slug":"understanding-trend%e2%80%90following-trading-systems","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/245737"}},{"articleId":245734,"title":"Understanding Mechanical Trading Systems","slug":"understanding-mechanical-trading-systems","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/245734"}},{"articleId":245731,"title":"The Risks of Trading Options and Futures","slug":"risks-trading-options-futures","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/245731"}},{"articleId":245728,"title":"Options for Getting Out of Options","slug":"options-getting-options","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/245728"}}],"fromCategory":[{"articleId":298881,"title":"34 Ways To Save Money on Utilities","slug":"34-ways-to-save-money-on-utilities","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/298881"}},{"articleId":288537,"title":"Financial Security For Dummies Cheat Sheet","slug":"financial-security-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/288537"}},{"articleId":259430,"title":"How to Decrease Debt","slug":"how-to-decrease-debt","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259430"}},{"articleId":259420,"title":"How to Determine Your Financial Net Worth","slug":"how-to-determine-your-financial-net-worth","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259420"}},{"articleId":251786,"title":"The Impact of Investing for College Costs","slug":"impact-investing-college-costs","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251786"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282636,"slug":"trading-options-for-dummies","isbn":"9781119828303","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles"],"amazon":{"default":"https://www.amazon.com/gp/product/1119828309/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119828309/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119828309-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119828309/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119828309/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/options-trading-for-dummies-4th-edition-cover-9781119828303-203x255.jpg","width":203,"height":255},"title":"Options Trading For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b>Dr. <b data-author-id=\"9240\">Joe Duarte</b></b> is a financial &#173;writer, private investor and trader, and former money manager/president of River Willow Capital Management. In addition to <i>Options Trading For Dummies</i>, he is the author of <i>Trading Futures For Dummies</i> and <i>Market Timing For Dummies</i>. Visit his website at joeduarteinthemoneyoptions.com</p>","authors":[{"authorId":9240,"name":"Joe Duarte","slug":"joe-duarte","description":" <p><b>Dr. Joe Duarte</b> is a financial &#173;writer, private investor and trader, and former money manager/president of River Willow Capital Management. In addition to <i>Options Trading For Dummies</i>, he is the author of <i>Trading Futures For Dummies</i> and <i>Market Timing For Dummies</i>. Visit his website at joeduarteinthemoneyoptions.com</p> ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9240"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828303&quot;]}]\" id=\"du-slot-64f0ab302eb77\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828303&quot;]}]\" id=\"du-slot-64f0ab302f2f8\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2023-07-27T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":245633},{"headers":{"creationTime":"2018-04-16T00:12:56+00:00","modifiedTime":"2023-08-23T19:04:10+00:00","timestamp":"2023-08-23T21:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"General Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"},"slug":"general-personal-finance","categoryId":34311}],"title":"10 Investing Tips for Success in Your 20s and 30s","strippedTitle":"10 investing tips for success in your 20s and 30s","slug":"10-essential-tips-investing-success-20s-30s","canonicalUrl":"","seo":{"metaDescription":"Check out these ten time-tested investing principles that can pay you big dividends for many years to come.","noIndex":0,"noFollow":0},"content":"Investing appears to be complicated and complex. But if you can take some relatively simple concepts to heart and adhere to them, you can greatly increase your success. Here are ten time-tested principles of investing success. Following these principles will pay you big dividends (and capital gains) for many years to come.\r\n<h3>Regularly save and invest 5 percent to 10 percent of your income</h3>\r\nUnless you enjoy a large inheritance, you should consistently save 5 percent to 10 percent of the money you’re earning. When should you start doing this? As soon as you begin earning money on a regular basis.\r\n\r\nPreferably, invest through a retirement savings account to reduce your taxes and ensure your future financial independence. You can reduce both your current federal and state income tax bills (on the contributions) as well as these ongoing bills (on the investment earnings).\r\n\r\nThe exact portion of your income you should be saving is driven by your goals and by your current financial assets and liabilities. Take the time to crunch some numbers to determine how much you should be saving monthly.\r\n<h3>Understand and use your employee benefits</h3>\r\nThe larger the employer, the more likely it is to offer avenues for you to invest conveniently through payroll deduction, and with possible tax benefits and discounts. Some companies enable you to buy company stock at a reduced price.\r\n\r\nOften, the most valuable benefit you have is a retirement savings plan, such as a 401(k) plan that enables you to make contributions and save on your current income taxation. Also, after the money is in the account, it can compound and grow over the years and decades without taxation.\r\n\r\nIf you’re self-employed, be sure to establish and use a retirement plan. Also take time to learn about the best investment options available to you — and use them.\r\n<h3>Thoroughly research before you invest</h3>\r\nThe allure of large expected returns too often is the enticement that gets novices hooked on a particular investment. That’s a whole lot more appealing than researching an investment. But research you must if you want to make an informed decision.\r\n\r\nBe sure you understand what you’re investing in. Don’t purchase any financial product that you don’t understand. Ask questions and compare what you’re being offered with the best sources I recommend. Beware of purchasing an investment on the basis of an advertisement or a salesperson’s solicitation.\r\n<h3>Shun investments with high commissions and expenses</h3>\r\nThe cost of the investments you buy is an important variable you can control. All fees must be disclosed in a prospectus, which you should always review before making any investment.\r\n<p class=\"article-tips warning\">Companies that sell their investment products through aggressive sales techniques generally have the worst financial products and the highest fees and commissions.</p>\r\n\r\n<h3>Invest the majority of your long-term money in ownership investments</h3>\r\nWhen you’re young, you have plenty of time to let your investments compound and grow. Likewise, you have time to recover from setbacks.\r\n\r\nSo with your long-term money, focus on investments that have appreciation potential, such as stocks, real estate, and your own business. When you invest in bonds or bank accounts, you’re simply lending your money to others and will earn a return that probably won’t keep you ahead of inflation and taxes.\r\n<h3>Avoid making emotionally based financial decisions</h3>\r\nSuccessful investors keep their composure when the going gets tough. You need the ability and wisdom to look beyond the current environment, understanding that it will change in the months and years ahead.\r\n\r\nYou don’t want to panic and sell your stock holdings after a major market correction, for example. In fact, you should consider such an event to be a buying opportunity for stocks. Be especially careful about making important financial decisions after a major life change, such as marriage, the birth of a child, a divorce, job loss, or a death in your family.\r\n<h3>Make investing decisions based on your plans and needs</h3>\r\nYour investment decisions should come out of your planning and your overall needs, goals, and desires. This requires looking at your overall financial situation first and then coming up with a comprehensive plan.\r\n\r\nDon’t be swayed and influenced by the predictive advice offered by various investment pundits or the latest news headlines and concerns. Trust that you know yourself and your financial situation better than anyone else does.\r\n<h3>Tap information sources with high-quality standards</h3>\r\nYou need to pare down the sources you use to keep up with investing news and the financial markets. Give priority to those that aren’t afraid to take a stand and recommend what’s in your best interests.\r\n\r\nThe public clearly has an appetite for opinion shows; on the political left, you have programs on CNN and MSNBC. On the political right, FOX has some popular conservative opinion shows.\r\n\r\nPolitical partisans distort the news rather than report the news, and they prevent you from better understanding what’s really going on so you can make informed decisions. Political partisans overstate the impact that the president and others can have over our economy and financial markets.\r\n<p class=\"article-tips remember\">Stay away from outlets that cater to advertisers or are driven by an ideological agenda.</p>\r\n\r\n<h3>Trust yourself first</h3>\r\nLook in the mirror. You’ll see the best financial person you can hire and trust. What may be missing is enough education and confidence to make more and better decisions on your own, which this book can assist you with doing.\r\n\r\nIf you need help making a major decision, hire conflict-free advisors who charge a fee for their time. Work in partnership with advisors. Never turn over or abdicate control.\r\n<h3>Invest in yourself and others</h3>\r\nDon’t get so wrapped up in making, saving, and investing money that you lose sight of what matters most to you. Invest in your education, your health, and your relationships with family members and friends.\r\n\r\nHaving a lot of money isn’t worth much if you don’t have your health and people with whom to share your life. Give your time and money to causes that better our society and our world.","description":"Investing appears to be complicated and complex. But if you can take some relatively simple concepts to heart and adhere to them, you can greatly increase your success. Here are ten time-tested principles of investing success. Following these principles will pay you big dividends (and capital gains) for many years to come.\r\n<h3>Regularly save and invest 5 percent to 10 percent of your income</h3>\r\nUnless you enjoy a large inheritance, you should consistently save 5 percent to 10 percent of the money you’re earning. When should you start doing this? As soon as you begin earning money on a regular basis.\r\n\r\nPreferably, invest through a retirement savings account to reduce your taxes and ensure your future financial independence. You can reduce both your current federal and state income tax bills (on the contributions) as well as these ongoing bills (on the investment earnings).\r\n\r\nThe exact portion of your income you should be saving is driven by your goals and by your current financial assets and liabilities. Take the time to crunch some numbers to determine how much you should be saving monthly.\r\n<h3>Understand and use your employee benefits</h3>\r\nThe larger the employer, the more likely it is to offer avenues for you to invest conveniently through payroll deduction, and with possible tax benefits and discounts. Some companies enable you to buy company stock at a reduced price.\r\n\r\nOften, the most valuable benefit you have is a retirement savings plan, such as a 401(k) plan that enables you to make contributions and save on your current income taxation. Also, after the money is in the account, it can compound and grow over the years and decades without taxation.\r\n\r\nIf you’re self-employed, be sure to establish and use a retirement plan. Also take time to learn about the best investment options available to you — and use them.\r\n<h3>Thoroughly research before you invest</h3>\r\nThe allure of large expected returns too often is the enticement that gets novices hooked on a particular investment. That’s a whole lot more appealing than researching an investment. But research you must if you want to make an informed decision.\r\n\r\nBe sure you understand what you’re investing in. Don’t purchase any financial product that you don’t understand. Ask questions and compare what you’re being offered with the best sources I recommend. Beware of purchasing an investment on the basis of an advertisement or a salesperson’s solicitation.\r\n<h3>Shun investments with high commissions and expenses</h3>\r\nThe cost of the investments you buy is an important variable you can control. All fees must be disclosed in a prospectus, which you should always review before making any investment.\r\n<p class=\"article-tips warning\">Companies that sell their investment products through aggressive sales techniques generally have the worst financial products and the highest fees and commissions.</p>\r\n\r\n<h3>Invest the majority of your long-term money in ownership investments</h3>\r\nWhen you’re young, you have plenty of time to let your investments compound and grow. Likewise, you have time to recover from setbacks.\r\n\r\nSo with your long-term money, focus on investments that have appreciation potential, such as stocks, real estate, and your own business. When you invest in bonds or bank accounts, you’re simply lending your money to others and will earn a return that probably won’t keep you ahead of inflation and taxes.\r\n<h3>Avoid making emotionally based financial decisions</h3>\r\nSuccessful investors keep their composure when the going gets tough. You need the ability and wisdom to look beyond the current environment, understanding that it will change in the months and years ahead.\r\n\r\nYou don’t want to panic and sell your stock holdings after a major market correction, for example. In fact, you should consider such an event to be a buying opportunity for stocks. Be especially careful about making important financial decisions after a major life change, such as marriage, the birth of a child, a divorce, job loss, or a death in your family.\r\n<h3>Make investing decisions based on your plans and needs</h3>\r\nYour investment decisions should come out of your planning and your overall needs, goals, and desires. This requires looking at your overall financial situation first and then coming up with a comprehensive plan.\r\n\r\nDon’t be swayed and influenced by the predictive advice offered by various investment pundits or the latest news headlines and concerns. Trust that you know yourself and your financial situation better than anyone else does.\r\n<h3>Tap information sources with high-quality standards</h3>\r\nYou need to pare down the sources you use to keep up with investing news and the financial markets. Give priority to those that aren’t afraid to take a stand and recommend what’s in your best interests.\r\n\r\nThe public clearly has an appetite for opinion shows; on the political left, you have programs on CNN and MSNBC. On the political right, FOX has some popular conservative opinion shows.\r\n\r\nPolitical partisans distort the news rather than report the news, and they prevent you from better understanding what’s really going on so you can make informed decisions. Political partisans overstate the impact that the president and others can have over our economy and financial markets.\r\n<p class=\"article-tips remember\">Stay away from outlets that cater to advertisers or are driven by an ideological agenda.</p>\r\n\r\n<h3>Trust yourself first</h3>\r\nLook in the mirror. You’ll see the best financial person you can hire and trust. What may be missing is enough education and confidence to make more and better decisions on your own, which this book can assist you with doing.\r\n\r\nIf you need help making a major decision, hire conflict-free advisors who charge a fee for their time. Work in partnership with advisors. Never turn over or abdicate control.\r\n<h3>Invest in yourself and others</h3>\r\nDon’t get so wrapped up in making, saving, and investing money that you lose sight of what matters most to you. Invest in your education, your health, and your relationships with family members and friends.\r\n\r\nHaving a lot of money isn’t worth much if you don’t have your health and people with whom to share your life. Give your time and money to causes that better our society and our world.","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Bruce Brammall</b> is a licensed financial adviser and mortgage broker, personal finance journalist, best-selling author and successful property investor. <b>Eric Tyson</b> and <b>Robert S. Griswold</b> are independently successful investors.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"primaryCategoryTaxonomy":{"categoryId":34311,"title":"General Personal Finance","slug":"general-personal-finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34311"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":251826,"title":"Investing in Your 20s and 30s: Tips to Maximize Your Stock Market Returns","slug":"investing-20s-30s-tips-maximize-stock-market-returns","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251826"}},{"articleId":251823,"title":"Investing in Your 20s and 30s: Sidestep Common Minefields","slug":"investing-20s-30s-sidestep-common-minefields","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251823"}},{"articleId":251820,"title":"Investing in Your 20s and 30s: Avoid Temptations and Hype","slug":"investing-20s-30s-avoid-temptations-hype","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251820"}},{"articleId":251817,"title":"Investing in Your 20s and 30s: Alternatives to Money Market Mutual Funds","slug":"investing-20s-30s-alternatives-money-market-mutual-funds","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251817"}},{"articleId":251814,"title":"Investing in Your 20s and 30s: Alternatives to Bank Accounts","slug":"investing-20s-30s-alternatives-bank-accounts","categoryList":["technology","computers","macs","general-macs"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251814"}}],"fromCategory":[{"articleId":298881,"title":"34 Ways To Save Money on Utilities","slug":"34-ways-to-save-money-on-utilities","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/298881"}},{"articleId":288537,"title":"Financial Security For Dummies Cheat Sheet","slug":"financial-security-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/288537"}},{"articleId":259430,"title":"How to Decrease Debt","slug":"how-to-decrease-debt","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259430"}},{"articleId":259420,"title":"How to Determine Your Financial Net Worth","slug":"how-to-determine-your-financial-net-worth","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/259420"}},{"articleId":251786,"title":"The Impact of Investing for College Costs","slug":"impact-investing-college-costs","categoryList":["business-careers-money","personal-finance","general-personal-finance"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251786"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282312,"slug":"investing-in-your-20s-30s-for-dummies","isbn":"9781119805403","categoryList":["business-careers-money","personal-finance","investing","general-investing"],"amazon":{"default":"https://www.amazon.com/gp/product/1119805406/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119805406/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119805406-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119805406/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119805406/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/investing-in-your-20s-30s-for-dummies-3e-cover-9781119805403-203x255.jpg","width":203,"height":255},"title":"Investing in Your 20s & 30s For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p><b data-author-id=\"8975\">Eric Tyson, MBA,</b> is a bestselling personal finance author, counselor, and writer. He is the author of the national bestselling financial books <i>Investing For Dummies, Personal Finance For Dummies,</i> and <i>Home Buying Kit For Dummies</i>.</p>","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Bruce Brammall</b> is a licensed financial adviser and mortgage broker, personal finance journalist, best-selling author and successful property investor. <b>Eric Tyson</b> and <b>Robert S. Griswold</b> are independently successful investors.</p>","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119805403&quot;]}]\" id=\"du-slot-64e6738eb195e\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;general-personal-finance&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119805403&quot;]}]\" id=\"du-slot-64e6738eb274c\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-09-15T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":251738},{"headers":{"creationTime":"2016-03-26T18:14:46+00:00","modifiedTime":"2023-08-23T14:19:17+00:00","timestamp":"2023-08-23T15:01:03+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"},"slug":"funds","categoryId":34296}],"title":"Stock ETFs: What Is a Micro Cap Stock?","strippedTitle":"stock etfs: what is a micro cap stock?","slug":"stock-etfs-what-is-a-micro-cap-stock","canonicalUrl":"","seo":{"metaDescription":"If you want to invest your money in companies that are smaller than small, you can invest in ETFs based on micro caps. These companies are larger than the corne","noIndex":0,"noFollow":0},"content":"If you want to invest your money in companies that are smaller than small, you can invest in ETFs based on micro caps. These companies are larger than the corner delicatessen, but sometimes not by much. In general, micro caps are publicly held companies with less than $300 million in outstanding stock.\r\n\r\nMicro caps, as you can imagine, are volatile little suckers, but as a group they offer impressive long-term performance. In terms of diversification, micro caps — in conservative quantity — could be a nice addition to your portfolio, though not a necessity. Take note that micro cap funds, even index ETFs, tend to charge considerably more in management fees than you’ll pay for most funds.\r\n\r\nMicros move at a modestly different pace from other equity asset classes. The theory is that because micro caps are heavy borrowers, their performance is more tied to interest rates than the performance of larger cap stocks. (Lower interest rates would be good for these stocks; higher interest rates would not.)\r\n\r\nMicro caps also tend to be more tied to the vicissitudes of the U.S. economy and less to the world economy than, say, the fortunes of General Electric or McDonald’s.\r\n\r\nGiven the high risk of owning any individual micro cap stock, it makes sense to work micro caps into your portfolio in fund form, despite the management fees, rather than trying to pick individual companies.\r\n\r\nTo date, a handful of micro cap ETFs have been introduced. They differ from one another to a much greater extent than do the larger cap ETFs.","description":"If you want to invest your money in companies that are smaller than small, you can invest in ETFs based on micro caps. These companies are larger than the corner delicatessen, but sometimes not by much. In general, micro caps are publicly held companies with less than $300 million in outstanding stock.\r\n\r\nMicro caps, as you can imagine, are volatile little suckers, but as a group they offer impressive long-term performance. In terms of diversification, micro caps — in conservative quantity — could be a nice addition to your portfolio, though not a necessity. Take note that micro cap funds, even index ETFs, tend to charge considerably more in management fees than you’ll pay for most funds.\r\n\r\nMicros move at a modestly different pace from other equity asset classes. The theory is that because micro caps are heavy borrowers, their performance is more tied to interest rates than the performance of larger cap stocks. (Lower interest rates would be good for these stocks; higher interest rates would not.)\r\n\r\nMicro caps also tend to be more tied to the vicissitudes of the U.S. economy and less to the world economy than, say, the fortunes of General Electric or McDonald’s.\r\n\r\nGiven the high risk of owning any individual micro cap stock, it makes sense to work micro caps into your portfolio in fund form, despite the management fees, rather than trying to pick individual companies.\r\n\r\nTo date, a handful of micro cap ETFs have been introduced. They differ from one another to a much greater extent than do the larger cap ETFs.","blurb":"","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <p><b>Russell Wild</b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"primaryCategoryTaxonomy":{"categoryId":34296,"title":"Funds","slug":"funds","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34296"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":183699,"title":"Choosing the Best ETFs","slug":"choosing-the-best-etfs","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183699"}},{"articleId":183698,"title":"How ETFs Differ from Mutual Funds","slug":"how-etfs-differ-from-mutual-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183698"}},{"articleId":183697,"title":"Websites for Up-to-Date ETF Information","slug":"websites-for-up-to-date-etf-information","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183697"}},{"articleId":183683,"title":"Asking a Financial Professional about Working ETFs into Your Portfolio","slug":"asking-a-financial-professional-about-working-etfs-into-your-portfolio","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183683"}}],"fromCategory":[{"articleId":296619,"title":"Hedge Funds For Dummies Cheat Sheet","slug":"hedge-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/296619"}},{"articleId":209064,"title":"Mutual Funds For Dummies Cheat Sheet","slug":"mutual-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/209064"}},{"articleId":208448,"title":"Exchange-Traded Funds For Dummies Cheat Sheet","slug":"exchange-traded-funds-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208448"}},{"articleId":199934,"title":"Introducing Basic Types of Hedge Funds","slug":"introducing-basic-types-of-hedge-funds","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/199934"}},{"articleId":198378,"title":"Hedge Fund Fees to Expect with Your Investment","slug":"hedge-fund-fees-to-expect-with-your-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/198378"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282184,"slug":"exchange-traded-funds-for-dummies","isbn":"9781119828839","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","funds"],"amazon":{"default":"https://www.amazon.com/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/111982883X-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/111982883X/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/exchange-traded-funds-for-dummies-3rd-edition-cover-9781119828839-203x255.jpg","width":203,"height":255},"title":"Exchange-Traded Funds For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"9023\">Russell Wild</b></b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters.</p>","authors":[{"authorId":9023,"name":"Russell Wild","slug":"russell-wild","description":" <p><b>Russell Wild</b> is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9023"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-64e61f2fab741\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;funds&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119828839&quot;]}]\" id=\"du-slot-64e61f2fabe3d\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"One year","lifeExpectancySetFrom":"2023-08-23T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":178211},{"headers":{"creationTime":"2023-08-16T19:38:18+00:00","modifiedTime":"2023-08-17T13:29:08+00:00","timestamp":"2023-08-17T15:01:02+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Investment Vehicles","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34290"},"slug":"investment-vehicles","categoryId":34290},{"name":"Stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"},"slug":"stocks","categoryId":34298}],"title":"Investing in Stocks for Income & Cash Flow","strippedTitle":"investing in stocks for income & cash flow","slug":"investing-in-stocks-for-income-cash-flow","canonicalUrl":"","seo":{"metaDescription":"Learn the pros and cons of dividend-paying stocks over other types of stocks, and who is best suited to this type of investment.","noIndex":0,"noFollow":0},"content":"Stocks are well known for their ability to appreciate (for capital gains potential), but not enough credit is given regarding stocks’ ability to boost your income and cash flow. Given that income will be a primary concern for many in the coming months and years (especially baby boomers and others concerned with retirement, pension issues, and so on), I consider this to be an important consideration.\r\n\r\n[caption id=\"attachment_300322\" align=\"alignnone\" width=\"630\"]<img class=\"size-full wp-image-300322\" src=\"https://www.dummies.com/wp-content/uploads/woman-working-laptop-home-adobeStock_339534482.jpg\" alt=\"\" width=\"630\" height=\"420\" /> ©MT-R / Adobe Stock[/caption]\r\n\r\nThe first income feature is the obvious — dividends! I love dividends, and they have excellent features that make them very attractive, such as their ability to meet or exceed the rate of inflation and the fact that they’re subject to lower taxes than, say, regular taxable interest or wages.\r\n\r\nDividend-paying stocks, called <em>income stocks</em>, deserve a spot in a variety of portfolios, especially those of investors at or near retirement. Also, I think that younger folks (such as millennials) can gain long-term financial benefits from having dividends reinvested to compound their growth (such as with dividend reinvestment plans).\r\n<h2 id=\"tab1\" >The basics of income stocks</h2>\r\nI certainly think that dividend-paying stocks are a great consideration for those investors seeking greater income in their portfolios. I especially like stocks with higher-than-average dividends that are known as <em>income stocks.</em> Income stocks take on a dual role: Not only can they appreciate, but they can also provide regular income. The following sections take a closer look at dividends and income stocks.\r\n<h3>Getting a grip on dividends and their rates</h3>\r\nWhen people talk about gaining income from stocks, they’re usually talking about dividends. Dividends are pro rata distributions that treat every stockholder the same. A <em>dividend</em> is nothing more than pro rata periodic distributions of cash (or sometimes stock) to the stock owner. You purchase dividend stocks primarily for income — not for spectacular growth potential.\r\n\r\nDividends are sometimes confused with interest. However, dividends are payouts to owners, whereas <em>interest</em> is a payment to a creditor. A stock investor is considered a part owner of the company they invest in and is entitled to dividends when they’re issued. A bank, on the other hand, considers you a creditor when you open an account; the bank borrows your money and pays you interest on it.\r\n\r\nA dividend is quoted as an annual dollar amount (or percentage yield), but it’s usually paid on a quarterly basis. For example, if a stock pays a dividend of $4 per share, you’re probably paid $1 every quarter. If, in this example, you have 200 shares, you’re paid $800 every year (if the dividend doesn’t change during that period), or $200 per quarter. Getting that regular dividend check every three months (for as long as you hold the stock) can be a nice perk. If the company continues to do well, that dividend can grow over time. A good income stock has a higher-than-average dividend (typically, 4 percent or higher).\r\n<p class=\"article-tips remember\">Dividend rates aren’t guaranteed, and they’re subject to the decisions of the stock issuer’s board of directors — they can go up or down, or in some extreme cases, the dividend can be suspended or even discontinued. Fortunately, most companies that issue dividends continue them indefinitely and actually increase dividend payments from time to time. Historically, dividend increases have equaled (or exceeded) the rate of inflation.</p>\r\n\r\n<h2 id=\"tab2\" >Who’s well suited for income stocks?</h2>\r\nWhat type of person is best suited to income stocks? Income stocks can be appropriate for many investors, but they’re an especially good match for the following individuals:\r\n<ul>\r\n \t<li><strong>Conservative and novice investors:</strong> Conservative investors like to see a slow but steady approach to growing their money while getting regular dividend checks. <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/stock-investing-for-beginners-300279/\">Novice investors</a> who want to start slowly also benefit from income stocks.</li>\r\n \t<li><strong>Retirees:</strong> Growth investing is best suited for long-term needs, whereas income investing is best suited to current needs. Retirees may want some growth in their portfolios, but they’re more concerned with regular income that can keep pace with inflation.</li>\r\n \t<li><strong>Dividend reinvestment plan (DRP) investors:</strong> For those investors who like to compound their money with DRPs, income stocks are perfect.</li>\r\n</ul>\r\nGiven recent economic trends and conditions for the foreseeable future, I think that dividends should be a mandatory part of the stock investor’s wealth-building approach. This is especially true for those in or approaching retirement.\r\n\r\nInvesting in stocks that have a reliable track record of increasing dividends is now easier than ever. In fact, there are exchange-traded funds (ETFs) that are focused on stocks with a long and consistent track record of raising dividends (typically on an annual basis).\r\n<h2 id=\"tab3\" >Assessing the advantages of income stocks</h2>\r\nIncome stocks tend to be among the least volatile of all stocks, and many investors view them as defensive stocks. <em>Defensive stocks</em> are stocks of companies that sell goods and services that are generally needed no matter what shape the economy is in. (Don’t confuse defensive stocks with <em>defense stocks,</em> which specialize in goods and equipment for the military.) Food, beverage, and utility companies are great examples of defensive stocks.\r\n\r\nEven when the economy is experiencing tough times, people still need to eat, drink, and turn on the lights. Companies that offer relatively high dividends also tend to be large firms in established, stable industries.\r\n\r\nSome industries in particular are known for high-dividend stocks. Utilities (such as electric, gas, and water), real estate investment trusts (REITs), and the energy sector (oil and gas royalty trusts) are places where you definitely find income stocks. Yes, you can find high-dividend stocks in other industries, but you find a higher concentration of them in these industries.\r\n<p class=\"article-tips tip\">To learn more about high-dividend stocks, and much more about stock investing, check out my book <a href=\"https://www.dummies.com/book/business-careers-money/personal-finance/investing/investment-vehicles/stocks/investing-in-stocks-for-dummies-299991/\"><em>Investing in Stocks For Dummies</em></a>.</p>\r\n\r\n<h2 id=\"tab4\" >Heeding the disadvantages of income stocks</h2>\r\nBefore you say, “Income stocks are great! I’ll get my checkbook and buy a batch right now,” take a look at the following potential disadvantages (ugh!). Income stocks do come with some fine print.\r\n<h3>What goes up …</h3>\r\nIncome stocks can go down as well as up, just as any stock can. The factors that affect stocks in general — politics, megatrends, different kinds of risk, and so on — affect income stocks, too. Fortunately, income stocks don’t get hit as hard as other stocks when the market is declining because high dividends tend to act as a support to the stock price. Therefore, income stocks’ prices usually fall less dramatically than other stocks’ prices in a declining market.\r\n<h3>Interest-rate sensitivity</h3>\r\nIncome stocks can be sensitive to rising interest rates. When interest rates go up, other investments (such as corporate bonds, U.S. Treasury securities, and bank certificates of deposit [CDs]) are more attractive. When your income stock yields 4 percent and interest rates go up to 5 percent, 6 percent, or higher, you may think, “Hmm, why settle for a 4 percent yield when I can get better elsewhere?” As more and more investors sell their low-yield stocks, the prices for those stocks fall.\r\n\r\nAnother point to note is that rising interest rates may hurt the company’s financial strength. If the company has to pay more interest, that may affect the company’s earnings, which, in turn, may affect the company’s ability to continue paying dividends.\r\n<p class=\"article-tips remember\">Dividend-paying companies that experience consistently falling revenues tend to cut dividends. In this case, <em>consistent</em> means two or more years.</p>\r\n\r\n<h3>The effect of inflation</h3>\r\nAlthough many companies raise their dividends on a regular basis, some don’t. Or if they do raise their dividends, the increases may be small. If income is your primary consideration, you want to be aware of this fact. If you’re getting the same dividend year after year and this income is important to you, rising inflation becomes a problem.\r\n\r\nSay that you have XYZ stock at $10 per share with an indicated annual dividend of 30 cents. The yield is 3 percent (30 cents @@ds $10). If you have a yield of 3 percent two years in a row, how do you feel when inflation rises 6 percent one year and 7 percent the next year? Because inflation means your costs are rising, inflation shrinks the value of the dividend income you receive.\r\n\r\nFortunately, studies show that, in general, dividends do better in inflationary environments than bonds and other fixed-rate investments do. Usually, the dividends of companies that provide consumer staples (food, energy, and so on) meet or exceed the rate of inflation. This is why some investment gurus describe companies that pay growing dividends as having stocks that are “better than bonds.”\r\n<h3>Uncle Sam’s cut</h3>\r\nThe government usually taxes dividends as ordinary income. Find out from your tax person whether potentially higher tax rates on dividends are in effect for the current or subsequent tax year.\r\n<h2 id=\"tab5\" >Stock dividends or company dividends?</h2>\r\nThe term <em>stock dividend</em> is commonly used in financial discussions about the stock market. However, the reality is that dividends are not paid by stocks; they’re paid pro rata distributions of cash by companies. It may sound like I’m splitting hairs, but it’s a fundamental difference.\r\n\r\nStock prices are subject to the whims of market buying and selling — one day the share prices are up nicely; the next day prices go down when that day’s headlines spook the market. Because the dividend isn’t volatile and it’s paid with regularity (quarterly usually), it’s more predictable. I think that investors should be in the business of “collecting cash flows” as opposed to fretting over the ebbs and flows of the market.\r\n\r\nWhat does that mean? If a hundred shares of a given dividend-paying stock provide, say, $100 per year in annual dividends, the income-minded stock investor should keep a running tally of annual dividend amounts. That way, they keep investing until they reach a desired income level (such as $2,000 annual dividend income) and feel confident that this dividend income can be relatively reliable and will keep growing as payouts grow from company operations. Lastly, keep in mind that technically a “stock dividend” is actually a pro rata distribution of stock (and not cash).","description":"Stocks are well known for their ability to appreciate (for capital gains potential), but not enough credit is given regarding stocks’ ability to boost your income and cash flow. Given that income will be a primary concern for many in the coming months and years (especially baby boomers and others concerned with retirement, pension issues, and so on), I consider this to be an important consideration.\r\n\r\n[caption id=\"attachment_300322\" align=\"alignnone\" width=\"630\"]<img class=\"size-full wp-image-300322\" src=\"https://www.dummies.com/wp-content/uploads/woman-working-laptop-home-adobeStock_339534482.jpg\" alt=\"\" width=\"630\" height=\"420\" /> ©MT-R / Adobe Stock[/caption]\r\n\r\nThe first income feature is the obvious — dividends! I love dividends, and they have excellent features that make them very attractive, such as their ability to meet or exceed the rate of inflation and the fact that they’re subject to lower taxes than, say, regular taxable interest or wages.\r\n\r\nDividend-paying stocks, called <em>income stocks</em>, deserve a spot in a variety of portfolios, especially those of investors at or near retirement. Also, I think that younger folks (such as millennials) can gain long-term financial benefits from having dividends reinvested to compound their growth (such as with dividend reinvestment plans).\r\n<h2 id=\"tab1\" >The basics of income stocks</h2>\r\nI certainly think that dividend-paying stocks are a great consideration for those investors seeking greater income in their portfolios. I especially like stocks with higher-than-average dividends that are known as <em>income stocks.</em> Income stocks take on a dual role: Not only can they appreciate, but they can also provide regular income. The following sections take a closer look at dividends and income stocks.\r\n<h3>Getting a grip on dividends and their rates</h3>\r\nWhen people talk about gaining income from stocks, they’re usually talking about dividends. Dividends are pro rata distributions that treat every stockholder the same. A <em>dividend</em> is nothing more than pro rata periodic distributions of cash (or sometimes stock) to the stock owner. You purchase dividend stocks primarily for income — not for spectacular growth potential.\r\n\r\nDividends are sometimes confused with interest. However, dividends are payouts to owners, whereas <em>interest</em> is a payment to a creditor. A stock investor is considered a part owner of the company they invest in and is entitled to dividends when they’re issued. A bank, on the other hand, considers you a creditor when you open an account; the bank borrows your money and pays you interest on it.\r\n\r\nA dividend is quoted as an annual dollar amount (or percentage yield), but it’s usually paid on a quarterly basis. For example, if a stock pays a dividend of $4 per share, you’re probably paid $1 every quarter. If, in this example, you have 200 shares, you’re paid $800 every year (if the dividend doesn’t change during that period), or $200 per quarter. Getting that regular dividend check every three months (for as long as you hold the stock) can be a nice perk. If the company continues to do well, that dividend can grow over time. A good income stock has a higher-than-average dividend (typically, 4 percent or higher).\r\n<p class=\"article-tips remember\">Dividend rates aren’t guaranteed, and they’re subject to the decisions of the stock issuer’s board of directors — they can go up or down, or in some extreme cases, the dividend can be suspended or even discontinued. Fortunately, most companies that issue dividends continue them indefinitely and actually increase dividend payments from time to time. Historically, dividend increases have equaled (or exceeded) the rate of inflation.</p>\r\n\r\n<h2 id=\"tab2\" >Who’s well suited for income stocks?</h2>\r\nWhat type of person is best suited to income stocks? Income stocks can be appropriate for many investors, but they’re an especially good match for the following individuals:\r\n<ul>\r\n \t<li><strong>Conservative and novice investors:</strong> Conservative investors like to see a slow but steady approach to growing their money while getting regular dividend checks. <a href=\"https://www.dummies.com/article/business-careers-money/personal-finance/investing/investment-vehicles/stocks/stock-investing-for-beginners-300279/\">Novice investors</a> who want to start slowly also benefit from income stocks.</li>\r\n \t<li><strong>Retirees:</strong> Growth investing is best suited for long-term needs, whereas income investing is best suited to current needs. Retirees may want some growth in their portfolios, but they’re more concerned with regular income that can keep pace with inflation.</li>\r\n \t<li><strong>Dividend reinvestment plan (DRP) investors:</strong> For those investors who like to compound their money with DRPs, income stocks are perfect.</li>\r\n</ul>\r\nGiven recent economic trends and conditions for the foreseeable future, I think that dividends should be a mandatory part of the stock investor’s wealth-building approach. This is especially true for those in or approaching retirement.\r\n\r\nInvesting in stocks that have a reliable track record of increasing dividends is now easier than ever. In fact, there are exchange-traded funds (ETFs) that are focused on stocks with a long and consistent track record of raising dividends (typically on an annual basis).\r\n<h2 id=\"tab3\" >Assessing the advantages of income stocks</h2>\r\nIncome stocks tend to be among the least volatile of all stocks, and many investors view them as defensive stocks. <em>Defensive stocks</em> are stocks of companies that sell goods and services that are generally needed no matter what shape the economy is in. (Don’t confuse defensive stocks with <em>defense stocks,</em> which specialize in goods and equipment for the military.) Food, beverage, and utility companies are great examples of defensive stocks.\r\n\r\nEven when the economy is experiencing tough times, people still need to eat, drink, and turn on the lights. Companies that offer relatively high dividends also tend to be large firms in established, stable industries.\r\n\r\nSome industries in particular are known for high-dividend stocks. Utilities (such as electric, gas, and water), real estate investment trusts (REITs), and the energy sector (oil and gas royalty trusts) are places where you definitely find income stocks. Yes, you can find high-dividend stocks in other industries, but you find a higher concentration of them in these industries.\r\n<p class=\"article-tips tip\">To learn more about high-dividend stocks, and much more about stock investing, check out my book <a href=\"https://www.dummies.com/book/business-careers-money/personal-finance/investing/investment-vehicles/stocks/investing-in-stocks-for-dummies-299991/\"><em>Investing in Stocks For Dummies</em></a>.</p>\r\n\r\n<h2 id=\"tab4\" >Heeding the disadvantages of income stocks</h2>\r\nBefore you say, “Income stocks are great! I’ll get my checkbook and buy a batch right now,” take a look at the following potential disadvantages (ugh!). Income stocks do come with some fine print.\r\n<h3>What goes up …</h3>\r\nIncome stocks can go down as well as up, just as any stock can. The factors that affect stocks in general — politics, megatrends, different kinds of risk, and so on — affect income stocks, too. Fortunately, income stocks don’t get hit as hard as other stocks when the market is declining because high dividends tend to act as a support to the stock price. Therefore, income stocks’ prices usually fall less dramatically than other stocks’ prices in a declining market.\r\n<h3>Interest-rate sensitivity</h3>\r\nIncome stocks can be sensitive to rising interest rates. When interest rates go up, other investments (such as corporate bonds, U.S. Treasury securities, and bank certificates of deposit [CDs]) are more attractive. When your income stock yields 4 percent and interest rates go up to 5 percent, 6 percent, or higher, you may think, “Hmm, why settle for a 4 percent yield when I can get better elsewhere?” As more and more investors sell their low-yield stocks, the prices for those stocks fall.\r\n\r\nAnother point to note is that rising interest rates may hurt the company’s financial strength. If the company has to pay more interest, that may affect the company’s earnings, which, in turn, may affect the company’s ability to continue paying dividends.\r\n<p class=\"article-tips remember\">Dividend-paying companies that experience consistently falling revenues tend to cut dividends. In this case, <em>consistent</em> means two or more years.</p>\r\n\r\n<h3>The effect of inflation</h3>\r\nAlthough many companies raise their dividends on a regular basis, some don’t. Or if they do raise their dividends, the increases may be small. If income is your primary consideration, you want to be aware of this fact. If you’re getting the same dividend year after year and this income is important to you, rising inflation becomes a problem.\r\n\r\nSay that you have XYZ stock at $10 per share with an indicated annual dividend of 30 cents. The yield is 3 percent (30 cents @@ds $10). If you have a yield of 3 percent two years in a row, how do you feel when inflation rises 6 percent one year and 7 percent the next year? Because inflation means your costs are rising, inflation shrinks the value of the dividend income you receive.\r\n\r\nFortunately, studies show that, in general, dividends do better in inflationary environments than bonds and other fixed-rate investments do. Usually, the dividends of companies that provide consumer staples (food, energy, and so on) meet or exceed the rate of inflation. This is why some investment gurus describe companies that pay growing dividends as having stocks that are “better than bonds.”\r\n<h3>Uncle Sam’s cut</h3>\r\nThe government usually taxes dividends as ordinary income. Find out from your tax person whether potentially higher tax rates on dividends are in effect for the current or subsequent tax year.\r\n<h2 id=\"tab5\" >Stock dividends or company dividends?</h2>\r\nThe term <em>stock dividend</em> is commonly used in financial discussions about the stock market. However, the reality is that dividends are not paid by stocks; they’re paid pro rata distributions of cash by companies. It may sound like I’m splitting hairs, but it’s a fundamental difference.\r\n\r\nStock prices are subject to the whims of market buying and selling — one day the share prices are up nicely; the next day prices go down when that day’s headlines spook the market. Because the dividend isn’t volatile and it’s paid with regularity (quarterly usually), it’s more predictable. I think that investors should be in the business of “collecting cash flows” as opposed to fretting over the ebbs and flows of the market.\r\n\r\nWhat does that mean? If a hundred shares of a given dividend-paying stock provide, say, $100 per year in annual dividends, the income-minded stock investor should keep a running tally of annual dividend amounts. That way, they keep investing until they reach a desired income level (such as $2,000 annual dividend income) and feel confident that this dividend income can be relatively reliable and will keep growing as payouts grow from company operations. Lastly, keep in mind that technically a “stock dividend” is actually a pro rata distribution of stock (and not cash).","blurb":"","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>Paul Mladjenovic, CFP,</b> has written four editions of <i>Stock Investing For Dummies</i> and has taught would&#45;be investors about stock investing since 1983. As a certified financial planner, he personally coaches his clients on stock investing strategies. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"primaryCategoryTaxonomy":{"categoryId":34298,"title":"Stocks","slug":"stocks","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34298"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"The basics of income stocks","target":"#tab1"},{"label":"Who’s well suited for income stocks?","target":"#tab2"},{"label":"Assessing the advantages of income stocks","target":"#tab3"},{"label":"Heeding the disadvantages of income stocks","target":"#tab4"},{"label":"Stock dividends or company dividends?","target":"#tab5"}],"relatedArticles":{"fromBook":[{"articleId":300279,"title":"Stock Investing for Beginners","slug":"stock-investing-for-beginners","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/300279"}}],"fromCategory":[{"articleId":300279,"title":"Stock Investing for Beginners","slug":"stock-investing-for-beginners","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/300279"}},{"articleId":283116,"title":"10 Reasons Not to Invest in Marijuana Stocks","slug":"10-reasons-not-to-invest-in-marijuana-stocks","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283116"}},{"articleId":283111,"title":"11 Criteria for Choosing a Cannabis Investment","slug":"11-criteria-for-choosing-a-cannabis-investment","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283111"}},{"articleId":283105,"title":"Cannabis Investments: Risks Inherent in Momentum Investing","slug":"cannabis-investments-risks-inherent-in-momentum-investing","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283105"}},{"articleId":283098,"title":"Strategies for Investing in Cannabis Stocks","slug":"investing-in-cannabis-spotting-opportunities-to-buy-or-sell","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/283098"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":299991,"slug":"investing-in-stocks-for-dummies","isbn":"9781394201136","categoryList":["business-careers-money","personal-finance","investing","investment-vehicles","stocks"],"amazon":{"default":"https://www.amazon.com/gp/product/1394201133/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1394201133/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1394201133-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1394201133/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1394201133/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/investing-in-stocks-for-dummies-cover-9781394201136-164x255.jpg","width":164,"height":255},"title":"Investing in Stocks For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"9001\">Paul Mladjenovic</b>, CFP,</b> has written four editions of <i>Stock Investing For Dummies</i> and has taught would&#45;be investors about stock investing since 1983. As a certified financial planner, he personally coaches his clients on stock investing strategies.</p>","authors":[{"authorId":9001,"name":"Paul Mladjenovic","slug":"paul-mladjenovic","description":" <p><b>Paul Mladjenovic, CFP,</b> has written four editions of <i>Stock Investing For Dummies</i> and has taught would&#45;be investors about stock investing since 1983. As a certified financial planner, he personally coaches his clients on stock investing strategies. ","hasArticle":false,"_links":{"self":"https://dummies-api.dummies.com/v2/authors/9001"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;investment-vehicles&quot;,&quot;stocks&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781394201136&quot;]}]\" id=\"du-slot-64de362ea19e8\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = 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2,310 results
2,310 results
Real Estate REITs For Dummies Cheat Sheet

Cheat Sheet / Updated 09-07-2023

A real estate investment trust (REIT) is a company that owns, manages, and/or finances real estate holdings. These holdings can be in the form of apartment buildings, hotels, shopping centers, self-storage facilities, warehouses, and even billboards, data centers, cell towers, woodlands, and many others. REITs have stock attributes (liquidity and transparency) and, at the same time, enable you to enjoy the benefits of owning income-producing real estate. With this Cheat Sheet, you get a quick primer on the benefits of REIT investment, how to add REITs to your portfolio, how to choose smart REITs, and how to become a virtual landlord without the aggravation of owning private real estate.

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General Personal Finance Personal Finance For Dummies Cheat Sheet

Cheat Sheet / Updated 09-05-2023

A lot of financial advice ignores the big picture and focuses narrowly on investing. Because money is not an end in itself but a part of your whole life, connecting your financial goals to the rest of your life is important. You need a broad understanding of personal finance to include all areas of your financial life: spending, taxes, saving and investing, insurance, and planning for major goals such as education, buying a home, and retirement. The following keys to success aren’t a magic elixir, but they can help you get started thinking about the big picture.

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Bonds Buying U.S. Savings Bonds in an Uncertain Economy

Article / Updated 09-01-2023

In a down economy, U.S. savings bonds are one of the safest investments you can make. Savings bonds are nonmarketable securities — when you purchase them, they’re registered to you and you can’t sell them to another investor. Uncle Sam offers two types of savings bonds, Series EE and Series I, which are backed by the full faith and credit of the U.S. government and are considered the safest of all investments. Here’s more info on each type: Series EE bonds: These bonds earn a fixed rate of return set by the U.S. Treasury. They’re accrual bonds, which means the interest accumulates and is compounded semiannually (rather than being paid to the owner as it’s earned each month). If you hold one of these bonds, you receive the interest when you redeem the bonds. Series I bonds: The interest you earn from I bonds comes in two parts: A fixed-rate component established when you purchase the bond A second component that’s equal to the rate of inflation, adjusted semiannually (based on the consumer price index for March and September) Although the fixed-rate interest component for Series I bonds is low, these bonds help protect you against inflation. If inflation goes up, so does the interest rate you earn because the variable-rate portion is adjusted every six months; for example, when the fixed-rate component is 2 percent and the inflation adjustment is 5 percent, an investment in a Series I bond is guaranteed to return 7 percent. But remember, the total interest rate can also go down as the inflation adjustment decreases. For both bonds, the purchase limit is $5,000 per Social Security number for each calendar year. You can easily purchase and redeem the bonds in electronic format through the Department of the Treasury’s Web site. If you purchase the bonds electronically, you can get any denomination of $25 or more, including penny increments. The purchase price is equal to the face value. You can also purchase the bonds in paper form through various financial institutions and payroll savings plans. Paper I bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, and $5,000; they’re purchased for their face value. However, you can get paper versions of EE bonds at half their face value; they’ll be worth face value at maturity. Paper EE bonds are offered in denominations of $50, $75, $100, $200, $500, $1000, $5,000, and $10,000. The interest on both bonds compounds semiannually for 30 years, but you don’t have to hold the bonds for that long. You can redeem the bonds after 12 months, but you pay a three-month interest penalty if you redeem the bonds within five years of the purchase date. As for tax treatment, U.S. savings bonds are exempt from state and local income tax. Federal income tax on interest earned can be deferred until redemption or final maturity, whichever occurs first. Tax benefits are available when you use the bonds for education purposes.

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Funds Commodity ETFs: A Vastly Improved Way to Buy Gold

Article / Updated 08-31-2023

When, in November 2004, State Street Global Advisors introduced the first gold ETF, it was a truly revolutionary moment. You buy a share just as you would buy a share of any other security, and each share gives you an ownership interest in one-tenth of an ounce of gold held by the fund. Yes, the gold is actually held in various bank vaults. You can even see pictures of one such vault filled to near capacity (very cool!) at SPDR Gold Shares website. If you are going to buy gold, this is far and away the easiest and most sensible way to do it. You currently have several ETF options for buying gold. Two that would work just fine include the original from State Street — the SPDR Gold Shares (GLD) — and a second from iShares introduced months later — the iShares Gold Trust (IAU). Both funds are essentially the same. Flip a coin (gold or other), but then go with the iShares fund, simply because it costs less: 0.25 percent versus 0.40 percent. Strange as it seems, the Internal Revenue Service considers gold to be a collectible for tax purposes. A share of a gold ETF is considered the same as, say, a gold Turkish coin from 1923 (don’t ask). So what, you ask? As it happens, the long-term capital gains tax rate on collectibles is 28 percent and not the more favorable 15 percent afforded to capital gains on stocks. Holding the ETF should be no problem from a tax standpoint (gold certainly won’t pay dividends), but when you sell, you could get hit hard on any gains. Gold ETFs, therefore, are best kept in tax-advantaged accounts, such as your IRA. (This strategy won’t serve you well if gold prices tumble and you sell. Then, you’d rather have held the ETF in a taxable account so you could write off the capital loss.)

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Retirement How to Protect Your Retirement Money with Insurance

Article / Updated 08-31-2023

Protecting your retirement funds from disaster is a critical part of retirement planning. That’s where insurance comes in. You want to make sure your plan can withstand an unexpected event. Typically, health scares are the culprits in disrupting a plan, but home and auto accidents can be major expenses, too. Find your insurance declaration pages. These documents will tell you how much coverage you have, which you’ll need to evaluate your plan and make certain you’re protected. Check property and casualty coverages If you’re planning for retirement, it’s important that you have in place the right amount of automobile and homeowner's (or renter's) insurance coverage, in addition to healthcare coverage: Automobile insurance: Your car can be the source of enormous financial losses, not only to your vehicle but to someone else's vehicle and other personal property. Additionally, the financial hit from injuries can wipe out a financial plan overnight. If you’re nearing retirement age, you likely have significant assets to protect. Simply accepting the minimum coverage required by your state is likely not enough. Homeowner's (or renter's) insurance: If you own your home, it might be one of the pieces of bedrock in your financial plan. If you don’t have rent or a mortgage, you’re well ahead of those who spend 30 percent of their budget for housing. Protecting your home from a devastating fire or other catastrophe is important. Don’t count on the insurance company to verify that you have enough coverage. Renters insurance can help safeguard your personal belongings. Insurance needs remain fairly unchanged as you near retirement—you need to protect your home whether you’re 34 or 64. But one factor that you might want to modify as you age is your deductible. Your deductible is how much of a loss you’re responsible for in an accident. Let’s say your car sustains $1,500 in damage. If you’re young, you might not have the financial resources to handle a large hit and so you opt for a lower $250 deductible. The lower deductible comes at a cost, in the form of a higher monthly payment. As you age, however, you probably have a larger financial reserve. One easy way to save money on insurance is to push up your deductible to $1,000 and save on your monthly premiums. Log into your insurance provider’s site, as shown, to see whether a higher deductible is available. You’ll also want to double-check that the limits are appropriate. Get ready for a rainy day: Umbrella insurance Knowing your coverage limits on your automotive and homeowner’s insurance policies unlocks the next phase of insurance. As you age and amass more money, you have more at risk from a big accident. Not only do you have more money to lose, you have less time to recover from a financial blow. After looking at your limits on your homeowner’s and automotive plans, you might see a disconnect. If your net worth exceeds your insurance limits, that’s a red flag. If you’ve accumulated a big nest egg, you don’t want to see it evaporate if you’re caught in a massive car pileup on the freeway. Similarly, if someone gets seriously hurt on your property, lawsuit damages can be enormous. How do you protect yourself other than never leaving the house or never inviting someone over to visit? Enter umbrella insurance, which unlocks millions of dollars of extra coverage beyond what your homeowner’s and auto policies cover. Umbrella policies don’t kick in until the limits of your homeowner’s and automotive policies are exceeded. Because the umbrella policy doesn’t pay anything until your homeowner's or auto policy’s limit is topped, the rates on umbrella policies tend to be reasonable. It’s common to buy $1 million of coverage for $100 or $200 a year. It’s a small price to pay for such a large amount of protection and peace of mind. How much umbrella coverage to you need? You could figure it out yourself, but I like Kiplinger’s How Much Umbrella Insurance Do I Need? calculator. The calculator, which is shown here, helps you buy just enough umbrella insurance to safeguard you from a major financial shock. To use the calculator, start with your net worth and work backwards: Enter your net worth. Your net worth is the value of what you own minus what you owe. To err on the side of safety, consider buying an umbrella policy valued at your net worth. Yes, some of your money is protected against creditors, as you’ll see in Steps 2 and 3. But when you take the money out of protected accounts, such as retirement accounts, it’s exposed. This approach isn’t necessarily recommended, but it's a conservative way to go. Enter your home equity value. The equity value is the market value of your home minus mortgages or loans. Most states protect at least some of your home equity. The Kiplinger calculator can tabulate how much of your home equity is at risk. Enter your retirement plan balances. Enter the value of your retirement plans, including 401(k), IRA, Roth IRA, SIMPLE IRA, and SEP IRA. Assets held in these accounts are protected from creditors. Set a limit to your homeowner's and auto policies. Remember that your auto and homeowner’s liability coverage pays injury claims first. Most umbrella policy insurers will require your homeowner's liability limit to be $250,000 or higher. And you’ll likely need to have a per-person liability limit on your auto policy of $250,000 or more and $500,000 per accident. You’ll usually get the most bang from your insurance buck if you raise your auto and homeowner's liability limits to the lowest required by your umbrella policy provider. Because you buy umbrella coverage in giant $1 million chunks, you can usually boost your total protection at a lower cost with an umbrella than with homeowner's or auto policy limits. Also, to save money on premiums, see if you can get your umbrella policy from the same company that provides your auto and homeowner’s policies. It’s also easier to coordinate payments from a single company. Protect your family with life insurance Thinking about all the things that can go wrong in life is no fun. That’s why I left the chapter on insurance for the end of the book. Planning for retirement should be fun. It gets you thinking about what’s most important in life and how to enjoy what you have for as long as possible. But you need to prepare for unhappy events, too. Understanding the benefits of life insurance Life insurance isn’t for you. It’s for your beneficiaries. You buy a life insurance policy on your life with the idea that it will cover your financial role if you pass away. Life insurance is especially critical when you’re starting a family. If you’re the primary breadwinner and you die, imagine the financial hardship your family would suffer. To combat this potentially cataclysmic crisis, you can buy a term-life insurance policy. By agreeing to pay an annual premium, if you were to die in a certain amount of time (or term), the insurance company agrees to pay out a pre-determined sum of money. The premium is the fee you pay to keep the policy active. Life insurance is there only to take care of people who count on you financially, after you die. If you’re not supporting anyone financially, you probably don’t need life insurance. Also, other forms of life insurance wrap savings and investment plans in with the death benefit. These plans are called whole-life plans. Whole-life plans might make sense for a subset of people, but they’re so complicated and potentially expensive that you should consult with an expert before buying one. Or you could just buy a term-life insurance policy and keep it simple. Estimating how much life insurance you need If you decide that you need life insurance, the next question is how much coverage you require. Some excellent online calculators, such as the following, can help you make the calculations: LifeHappens Calculate Your Needs calculator: Steps you through the important questions you need to answer to decide how much life insurance coverage you need. As you can see in Figure 16-8, the site shows you the two variables that determine how much money your dependents would need if you died and in the future. The site helps you measure both. LifeHappens Human Life Calculator: Puts a price tag on your existence by showing how much of a financial blow your family would suffer if you died today. Putting a price tag on your life is another way to think about your life insurance needs, as you can see in the sidebar, “What’s a Life Worth?” The calculator is an eye-opening tabulation of what a human life is worth. Bankrate Life Insurance Calculator: Looks at the question of how much life insurance you need in a slightly different way. Most life insurance calculators differ in their approach, so it’s a good idea to run your numbers through a few. Don’t fixate too much on how much life insurance you need. The biggest question is whether or not you need it. And if you do need it, don’t waste any time. Just buy it. An easy rule-of-thumb on how much you and your spouse collectively need is to buy? You’ll want a policy with a payout that’s 10 times your combined household income. Buying life insurance Talk about a tough sell. How would you like to buy something that costs you money every year, doesn't benefit you personally, and pays out only if you die? Not exactly uplifting. That’s why the moment someone hears that you’re interested in buying life insurance, sellers will come out of the woodwork to sell you a policy. Just search for life insurance online and you'll get life insurance ads on your screen for months. If you do decide that you’re ready to buy a policy, first check with the carrier that provides your auto, homeowner’s, or umbrella coverage. Most also sell life insurance and provide a multi-policy discount. In addition, online insurance forums, such as LendingTree.com and SelectQuote, will shop your insurance needs against a network of bidders. You can then compare coverage and prices to get the best combination for you.

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General Personal Finance Borrowing Money for Your Child's College Education

Article / Updated 08-31-2023

After you've tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust her borrowing options before you consider taking on any debt to pay for her college education. Putting yourself into debt to pay for your child's college education may have disastrous effects on your financial future — after all, there is no such thing as financial aid for your retirement. The best way to fund college costs, if borrowing is necessary, is to have your child borrow the money herself. Through federal student loan programs and financing programs available through various institutions, students have a number of attractive options available to them to finance college costs. Help your student apply for financial aid and exhaust all other resources and options prior to going into debt to pay for her college education. Your child can participate in work-study programs; do part-time work; acquire student loans, grants, and scholarships; attend college part-time while working full-time; or join AmeriCorps, the Peace Corps, or the military, all of which offer financial benefits for education. Tuition borrowing options If you borrow money for your child's college education, consider the list of primary resources: Federal PLUS loan: This loan is the best of all these options. The Parent Loan for Undergraduate Students (PLUS) is a popular, accessible, and reasonably priced loan where parents (with decent credit) can borrow up to the full cost of a dependent student's education minus any other financial aid for which the student qualifies. Repayment must begin within 60 days of receipt, and you may have up to ten years to repay the loan plus interest. For additional information visit the College Board online or call toll-free at 800-891-1253. Home equity line of credit: The interest rate on the loan will be high, and borrowing against your home equity can put your home at risk of foreclosure. 401(k) plan loan: If your 401(k) plan has a loan feature, the maximum amount you can borrow is the lesser of $50,000 or 50 percent of your vested account balance. Contact your 401(k) administrator for details. When you borrow money from your 401(k), that money is no longer invested. Even if you repay interest on this loan, you aren't getting the full benefit of your 401(k) plan investments. Also, the money you pull out of the 401(k) plan as a loan is pre-tax dollars, but the money you repay the loan with is after-tax. Wham! If you change employers while the loan is still outstanding and don't pay the loan in full, it's subject to a 10% early withdrawal penalty and taxation. Double wham! Unsecured loan from your bank: Also known as a signature loan, this loan is often the most expensive. The bank charges a much higher interest rate because no asset, such as a house, is securing this loan. These loans are often difficult to qualify for unless you have impeccable credit. Use the following table to organize possible financial-aid resources. Make a check in the left column if a particular source may be an option to pay for your child's college education, and if so, list the available funds in the column on the right. Tuition Borrowing Options for Parents Potential Option? Source Available Funds Federal PLUS Loan $ Home equity line of credit $ 401(k) plan loan $ Unsecured loan from bank $ Federal student aid programs Federal financial aid programs are intended to make up the difference between what your family can afford to pay and what college costs — and this aid is available to everyone. Although you may feel that your income level is too high and your child isn't eligible for financial aid, most Americans do qualify for aid in some way. With all loans, one of the primary issues to consider is the loan's cost — that is, the interest and any loan acquisition fees. The least expensive loan is general the one with the lowest interest rate. Here's a look at the cheapest federal student aid programs: Perkins loans have the strictest needs-based requirements. A student may borrow up to $5,500 per year, not to exceed $27,500. The current interest rate is 5 percent, and payments don't commence until the student graduates. Subsidized Stafford loans are also needs-based loans. A student may borrow up to $3,500 in the first year of undergraduate studies. This limit increases through college. As of this writing, the interest rate is 6.8 percent per year. The federal government, however, actually pays the interest due on the loan until the student is required to begin making payments six months after graduation. The loan must be paid over ten years. Unsubsidized Stafford loans are not needs based loans. The amount that you may borrow is identical to the Subsidized Stafford loan program if the student is your dependent. If the student is independent, however, he may borrow up to $5,500 initially with the limit increasing through the years of college. The interest rate on this type of loan is 6.8 percent annually, as of this writing. But, the federal government doesn't pay any of the interest on behalf of the student. Repayment begins six months after graduation, and the loan must be repaid over ten years. To get the most recent rates on student loans and detailed instructions on how to obtain these loans, visit the College Board. Setting payment expectations for your college student If you borrow money for your child's college education, communicate the expectations you have regarding paying for college and help your student set reasonable expectations. You may feel very strongly that your child participate in the financial responsibilities involved in obtaining this education. One strategy is to create a collaborative agreement between parent and child: Example of a promissory note for your student's college education. Benefits of the kind of collaborative arrangement include the following: Your child must apply himself and show a good faith effort, or you won't pay anything toward his college education. If your student drops out of school, he's on his own. If your child applies himself and achieves a B average or better, you will repay 80 to 100 percent of the college costs. You don't have to start repaying these loans until six months after your student graduates, which allows you additional time to accumulate funds to repay the debt or to adjust your monthly cash flow in order to be able to more comfortably pay the debts.

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General Personal Finance Why Analysts Are Important to Traders

Article / Updated 08-31-2023

No matter which analyst’s report you’re reading, you must remember that the analyst’s primary income is coming either from the brokerage house or the large institutional clients that he or she serves. Analysts rate stocks on whether you should consider purchasing them, but no standardized rating system exists. The three most common breakdowns that you can expect to see are shown here. Common Stock Recommendations from Analysts Analysis by Company A vAnalysis by Company B Analysis by Company C Buy Strong buy Recommended list Outperform Buy Trading buy Neutral Hold Market outperformer Underperform Sell Market perform Avoid Market underperformer You can see from this table that you must understand how a company’s analysts rate stocks for that company’s recommendations to have any value. Company A’s Buy recommendation is its highest, but Company B uses Strong buy for its highest rating, and Company C uses Recommended list for its top choice. Merely seeing that a stock is recommended as a Buy by a particular analyst means little if you don’t know which rating system the analyst is using. Unfortunately, when it comes to stock analysts, if the information is free, it’s probably no better than that free lunch you’re always looking to find. Someone has to pay the analyst, and if it isn’t you, you must find out who is footing the bill before you use that advice to make decisions. The best way to use analysts’ reports is to think of them as just one tool in your bucket of trading tools. Analysts are one good way to find out about an industry or a stock, but they’re not the final word about what you need to do. Only your own research using fundamental and technical analysis can help you make your investment decisions. Tracking how a company’s doing Analysts are good resources for finding historical data about how a company or industry is doing. Their reports usually summarize at least five years of data and frequently provide a historical perspective for the industry and the company that goes back many more years. In addition, analysts make projections about the earnings potential of the company they’re analyzing and indicate why they believe those projections by including information about new products being developed or currently being tested at various stages of market development. These reports help you track how a company is doing so you can find the gems that may indicate when to expect a company to break out of a current trading trend. For example, if an analyst covering a pharmaceutical company mentions that a new drug is under consideration by the Food and Drug Administration, you may look for news stories about the status of that drug and monitor the stock for indications that drug approval may soon be announced. Watching the technical charts may help you jump in at just the right time and catch the upward trend as positive news is announced. Stocks usually start to move in advance of news. Providing access to analyst calls In addition to reading reports, you can track companies by listening in on analyst calls. Some calls are sponsored by the companies themselves to review annual or quarterly results, and others are sponsored by independent analysts. Company‐sponsored calls Analyst calls sponsored by companies more often are earnings conference calls primarily for institutional investors and Wall Street analysts. They occur on either a quarterly, semiannual, or annual basis and can be the richest sources of information concerning a company’s fundamentals and future prospects. Senior management, which usually includes the chief executive officer (CEO), president, and chief financial officer (CFO), talks about their financial reports and then answers questions during these calls. The calls sometimes are scheduled to coincide with announcements of major changes in a company’s leadership or other breaking news about the company. After a formal statement, senior management answers questions from analysts. That’s when you usually can get the most up‐to‐date information about the company and how management views its financial performance and projections. Access to these calls used to be limited to professional analysts and institutional investors, but today more than 97 percent of companies that sponsor analyst calls open them to the media and individual investors, according to a survey conducted by the National Investor Relations Institute. This change primarily is credited to the SEC’s Fair Disclosure (FD) Regulation, which requires companies to make public all major announcements that can impact the value of the stock within 24 hours of informing any company outsiders. This rule helps level the information playing field for individual investors. Analysts no longer can count on getting two or three days of lead time on major announcements, which heretofore helped them inform major investors about company news. Often that amount of lead time enabled analysts to recommend buy or sell decisions to their key clients, but that same practice hurt small investors and traders who weren’t privy to the news. Some complain this new rule actually hurt the flow of information because companies clammed up in private conversations with analysts, making it harder for the analysts to write their investigative reports. Since the regulation first took effect in 2000, the fair disclosure rule has helped to level the information playing field. Independent analyst–sponsored calls Firms that provide independent analysis also sponsor calls primarily for their wealthy and institutional clients. During these calls, analysts often discuss breaking news about a company or an industry that they follow. Doing so gives their clients an opportunity to discuss key concerns directly with the analysts. Unless you’re a client, opportunities for listening in on these calls are rare.

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General Personal Finance 10 Investing Tips for Success in Your 20s and 30s

Article / Updated 08-23-2023

Investing appears to be complicated and complex. But if you can take some relatively simple concepts to heart and adhere to them, you can greatly increase your success. Here are ten time-tested principles of investing success. Following these principles will pay you big dividends (and capital gains) for many years to come. Regularly save and invest 5 percent to 10 percent of your income Unless you enjoy a large inheritance, you should consistently save 5 percent to 10 percent of the money you’re earning. When should you start doing this? As soon as you begin earning money on a regular basis. Preferably, invest through a retirement savings account to reduce your taxes and ensure your future financial independence. You can reduce both your current federal and state income tax bills (on the contributions) as well as these ongoing bills (on the investment earnings). The exact portion of your income you should be saving is driven by your goals and by your current financial assets and liabilities. Take the time to crunch some numbers to determine how much you should be saving monthly. Understand and use your employee benefits The larger the employer, the more likely it is to offer avenues for you to invest conveniently through payroll deduction, and with possible tax benefits and discounts. Some companies enable you to buy company stock at a reduced price. Often, the most valuable benefit you have is a retirement savings plan, such as a 401(k) plan that enables you to make contributions and save on your current income taxation. Also, after the money is in the account, it can compound and grow over the years and decades without taxation. If you’re self-employed, be sure to establish and use a retirement plan. Also take time to learn about the best investment options available to you — and use them. Thoroughly research before you invest The allure of large expected returns too often is the enticement that gets novices hooked on a particular investment. That’s a whole lot more appealing than researching an investment. But research you must if you want to make an informed decision. Be sure you understand what you’re investing in. Don’t purchase any financial product that you don’t understand. Ask questions and compare what you’re being offered with the best sources I recommend. Beware of purchasing an investment on the basis of an advertisement or a salesperson’s solicitation. Shun investments with high commissions and expenses The cost of the investments you buy is an important variable you can control. All fees must be disclosed in a prospectus, which you should always review before making any investment. Companies that sell their investment products through aggressive sales techniques generally have the worst financial products and the highest fees and commissions. Invest the majority of your long-term money in ownership investments When you’re young, you have plenty of time to let your investments compound and grow. Likewise, you have time to recover from setbacks. So with your long-term money, focus on investments that have appreciation potential, such as stocks, real estate, and your own business. When you invest in bonds or bank accounts, you’re simply lending your money to others and will earn a return that probably won’t keep you ahead of inflation and taxes. Avoid making emotionally based financial decisions Successful investors keep their composure when the going gets tough. You need the ability and wisdom to look beyond the current environment, understanding that it will change in the months and years ahead. You don’t want to panic and sell your stock holdings after a major market correction, for example. In fact, you should consider such an event to be a buying opportunity for stocks. Be especially careful about making important financial decisions after a major life change, such as marriage, the birth of a child, a divorce, job loss, or a death in your family. Make investing decisions based on your plans and needs Your investment decisions should come out of your planning and your overall needs, goals, and desires. This requires looking at your overall financial situation first and then coming up with a comprehensive plan. Don’t be swayed and influenced by the predictive advice offered by various investment pundits or the latest news headlines and concerns. Trust that you know yourself and your financial situation better than anyone else does. Tap information sources with high-quality standards You need to pare down the sources you use to keep up with investing news and the financial markets. Give priority to those that aren’t afraid to take a stand and recommend what’s in your best interests. The public clearly has an appetite for opinion shows; on the political left, you have programs on CNN and MSNBC. On the political right, FOX has some popular conservative opinion shows. Political partisans distort the news rather than report the news, and they prevent you from better understanding what’s really going on so you can make informed decisions. Political partisans overstate the impact that the president and others can have over our economy and financial markets. Stay away from outlets that cater to advertisers or are driven by an ideological agenda. Trust yourself first Look in the mirror. You’ll see the best financial person you can hire and trust. What may be missing is enough education and confidence to make more and better decisions on your own, which this book can assist you with doing. If you need help making a major decision, hire conflict-free advisors who charge a fee for their time. Work in partnership with advisors. Never turn over or abdicate control. Invest in yourself and others Don’t get so wrapped up in making, saving, and investing money that you lose sight of what matters most to you. Invest in your education, your health, and your relationships with family members and friends. Having a lot of money isn’t worth much if you don’t have your health and people with whom to share your life. Give your time and money to causes that better our society and our world.

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Funds Stock ETFs: What Is a Micro Cap Stock?

Article / Updated 08-23-2023

If you want to invest your money in companies that are smaller than small, you can invest in ETFs based on micro caps. These companies are larger than the corner delicatessen, but sometimes not by much. In general, micro caps are publicly held companies with less than $300 million in outstanding stock. Micro caps, as you can imagine, are volatile little suckers, but as a group they offer impressive long-term performance. In terms of diversification, micro caps — in conservative quantity — could be a nice addition to your portfolio, though not a necessity. Take note that micro cap funds, even index ETFs, tend to charge considerably more in management fees than you’ll pay for most funds. Micros move at a modestly different pace from other equity asset classes. The theory is that because micro caps are heavy borrowers, their performance is more tied to interest rates than the performance of larger cap stocks. (Lower interest rates would be good for these stocks; higher interest rates would not.) Micro caps also tend to be more tied to the vicissitudes of the U.S. economy and less to the world economy than, say, the fortunes of General Electric or McDonald’s. Given the high risk of owning any individual micro cap stock, it makes sense to work micro caps into your portfolio in fund form, despite the management fees, rather than trying to pick individual companies. To date, a handful of micro cap ETFs have been introduced. They differ from one another to a much greater extent than do the larger cap ETFs.

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Stocks Investing in Stocks for Income & Cash Flow

Article / Updated 08-17-2023

Stocks are well known for their ability to appreciate (for capital gains potential), but not enough credit is given regarding stocks’ ability to boost your income and cash flow. Given that income will be a primary concern for many in the coming months and years (especially baby boomers and others concerned with retirement, pension issues, and so on), I consider this to be an important consideration. The first income feature is the obvious — dividends! I love dividends, and they have excellent features that make them very attractive, such as their ability to meet or exceed the rate of inflation and the fact that they’re subject to lower taxes than, say, regular taxable interest or wages. Dividend-paying stocks, called income stocks, deserve a spot in a variety of portfolios, especially those of investors at or near retirement. Also, I think that younger folks (such as millennials) can gain long-term financial benefits from having dividends reinvested to compound their growth (such as with dividend reinvestment plans). The basics of income stocks I certainly think that dividend-paying stocks are a great consideration for those investors seeking greater income in their portfolios. I especially like stocks with higher-than-average dividends that are known as income stocks. Income stocks take on a dual role: Not only can they appreciate, but they can also provide regular income. The following sections take a closer look at dividends and income stocks. Getting a grip on dividends and their rates When people talk about gaining income from stocks, they’re usually talking about dividends. Dividends are pro rata distributions that treat every stockholder the same. A dividend is nothing more than pro rata periodic distributions of cash (or sometimes stock) to the stock owner. You purchase dividend stocks primarily for income — not for spectacular growth potential. Dividends are sometimes confused with interest. However, dividends are payouts to owners, whereas interest is a payment to a creditor. A stock investor is considered a part owner of the company they invest in and is entitled to dividends when they’re issued. A bank, on the other hand, considers you a creditor when you open an account; the bank borrows your money and pays you interest on it. A dividend is quoted as an annual dollar amount (or percentage yield), but it’s usually paid on a quarterly basis. For example, if a stock pays a dividend of $4 per share, you’re probably paid $1 every quarter. If, in this example, you have 200 shares, you’re paid $800 every year (if the dividend doesn’t change during that period), or $200 per quarter. Getting that regular dividend check every three months (for as long as you hold the stock) can be a nice perk. If the company continues to do well, that dividend can grow over time. A good income stock has a higher-than-average dividend (typically, 4 percent or higher). Dividend rates aren’t guaranteed, and they’re subject to the decisions of the stock issuer’s board of directors — they can go up or down, or in some extreme cases, the dividend can be suspended or even discontinued. Fortunately, most companies that issue dividends continue them indefinitely and actually increase dividend payments from time to time. Historically, dividend increases have equaled (or exceeded) the rate of inflation. Who’s well suited for income stocks? What type of person is best suited to income stocks? Income stocks can be appropriate for many investors, but they’re an especially good match for the following individuals: Conservative and novice investors: Conservative investors like to see a slow but steady approach to growing their money while getting regular dividend checks. Novice investors who want to start slowly also benefit from income stocks. Retirees: Growth investing is best suited for long-term needs, whereas income investing is best suited to current needs. Retirees may want some growth in their portfolios, but they’re more concerned with regular income that can keep pace with inflation. Dividend reinvestment plan (DRP) investors: For those investors who like to compound their money with DRPs, income stocks are perfect. Given recent economic trends and conditions for the foreseeable future, I think that dividends should be a mandatory part of the stock investor’s wealth-building approach. This is especially true for those in or approaching retirement. Investing in stocks that have a reliable track record of increasing dividends is now easier than ever. In fact, there are exchange-traded funds (ETFs) that are focused on stocks with a long and consistent track record of raising dividends (typically on an annual basis). Assessing the advantages of income stocks Income stocks tend to be among the least volatile of all stocks, and many investors view them as defensive stocks. Defensive stocks are stocks of companies that sell goods and services that are generally needed no matter what shape the economy is in. (Don’t confuse defensive stocks with defense stocks, which specialize in goods and equipment for the military.) Food, beverage, and utility companies are great examples of defensive stocks. Even when the economy is experiencing tough times, people still need to eat, drink, and turn on the lights. Companies that offer relatively high dividends also tend to be large firms in established, stable industries. Some industries in particular are known for high-dividend stocks. Utilities (such as electric, gas, and water), real estate investment trusts (REITs), and the energy sector (oil and gas royalty trusts) are places where you definitely find income stocks. Yes, you can find high-dividend stocks in other industries, but you find a higher concentration of them in these industries. To learn more about high-dividend stocks, and much more about stock investing, check out my book Investing in Stocks For Dummies. Heeding the disadvantages of income stocks Before you say, “Income stocks are great! I’ll get my checkbook and buy a batch right now,” take a look at the following potential disadvantages (ugh!). Income stocks do come with some fine print. What goes up … Income stocks can go down as well as up, just as any stock can. The factors that affect stocks in general — politics, megatrends, different kinds of risk, and so on — affect income stocks, too. Fortunately, income stocks don’t get hit as hard as other stocks when the market is declining because high dividends tend to act as a support to the stock price. Therefore, income stocks’ prices usually fall less dramatically than other stocks’ prices in a declining market. Interest-rate sensitivity Income stocks can be sensitive to rising interest rates. When interest rates go up, other investments (such as corporate bonds, U.S. Treasury securities, and bank certificates of deposit [CDs]) are more attractive. When your income stock yields 4 percent and interest rates go up to 5 percent, 6 percent, or higher, you may think, “Hmm, why settle for a 4 percent yield when I can get better elsewhere?” As more and more investors sell their low-yield stocks, the prices for those stocks fall. Another point to note is that rising interest rates may hurt the company’s financial strength. If the company has to pay more interest, that may affect the company’s earnings, which, in turn, may affect the company’s ability to continue paying dividends. Dividend-paying companies that experience consistently falling revenues tend to cut dividends. In this case, consistent means two or more years. The effect of inflation Although many companies raise their dividends on a regular basis, some don’t. Or if they do raise their dividends, the increases may be small. If income is your primary consideration, you want to be aware of this fact. If you’re getting the same dividend year after year and this income is important to you, rising inflation becomes a problem. Say that you have XYZ stock at $10 per share with an indicated annual dividend of 30 cents. The yield is 3 percent (30 cents @@ds $10). If you have a yield of 3 percent two years in a row, how do you feel when inflation rises 6 percent one year and 7 percent the next year? Because inflation means your costs are rising, inflation shrinks the value of the dividend income you receive. Fortunately, studies show that, in general, dividends do better in inflationary environments than bonds and other fixed-rate investments do. Usually, the dividends of companies that provide consumer staples (food, energy, and so on) meet or exceed the rate of inflation. This is why some investment gurus describe companies that pay growing dividends as having stocks that are “better than bonds.” Uncle Sam’s cut The government usually taxes dividends as ordinary income. Find out from your tax person whether potentially higher tax rates on dividends are in effect for the current or subsequent tax year. Stock dividends or company dividends? The term stock dividend is commonly used in financial discussions about the stock market. However, the reality is that dividends are not paid by stocks; they’re paid pro rata distributions of cash by companies. It may sound like I’m splitting hairs, but it’s a fundamental difference. Stock prices are subject to the whims of market buying and selling — one day the share prices are up nicely; the next day prices go down when that day’s headlines spook the market. Because the dividend isn’t volatile and it’s paid with regularity (quarterly usually), it’s more predictable. I think that investors should be in the business of “collecting cash flows” as opposed to fretting over the ebbs and flows of the market. What does that mean? If a hundred shares of a given dividend-paying stock provide, say, $100 per year in annual dividends, the income-minded stock investor should keep a running tally of annual dividend amounts. That way, they keep investing until they reach a desired income level (such as $2,000 annual dividend income) and feel confident that this dividend income can be relatively reliable and will keep growing as payouts grow from company operations. Lastly, keep in mind that technically a “stock dividend” is actually a pro rata distribution of stock (and not cash).

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