Be The Bank

Suzanne Goodfellow
 Copyright © 2020 Suzanne Goodfellow

All rights reserved

The characters and events portrayed in this book are fictitious. Any similarity to real persons, living or
dead, is coincidental and not intended by the author.

No part of this book may be reproduced, or stored in a retrieval system, or transmitted in any form or
by any means, electronic, mechanical, photocopying, recording, or otherwise, without express written
permission of the publisher.

ISBN-13: 9781234567890
ISBN-10: 1477123456

Cover design by: Art Painter

Library of Congress Control Number: 2018675309
Printed in the United States of America
This book is dedicated to my husband who has eaten a lot of fried rice while I finished this
book. And, to all the clients and students I have taught over the years.
 Contents

Title Page
Copyright
Dedication

INTRODUCTION
CHAPTER 1 – Take control of your money
CHAPTER TWO – Time Value of Money
CHAPTER THREE – How to diversify Investments and Your Risk
Tolerance
CHAPTER FOUR – Where to Invest
CHAPTER FIVE – Costs of Investing
CHAPTER SIX –Investment Products
About The Author
 INTRODUCTION
BE THE BANK was written to tell you how to keep your own
money. Many people put their money in the bank, in a savings account, that
pays less than the inflation rate because most people don’t know where to
invest their money. They think, “it’s in a bank, it’s safe, what more do I
need?” Or worse, they keep cash and never invest because they are not sure
how or where to put their money. This book is to help clear up confusion.
Many terms (like Inflation Rate below) are defined so you can understand the
terms of investing.
Inflation rate –is based on the value of a dollar in relation to prices.
Today’s current inflation rate is 2%. If you buy a pack of gum for $1 today, a
year from now with inflation, the gum will cost $1.02. On the other hand, if
you save the dollar, at a 6% rate, you would have $1.06. If you take the $1.06
and go buy the gum which now, with inflation, costs $1.02, you will still
have a 4% actual gain or profit on your money. $1.06 - $1.02 = .04. As of
this writing, though, banks only pay about 1.05% for a savings account (NOT
6%!), which means, you actually have a total of $1.01 in your savings
account at the end of the year ($1 X 1.05% = $1.01), which is still not enough
to buy a stick of gum, (much less pay off the 20% interest charged by the
credit card companies for money you borrow). This is why you need to keep
reading.
Hmmm… So, if banks do not pay more than inflation, how do I save
money. Well, there is more bad news, many banks have high fees. You will
never reach your goals unless you know how to Be the bank. This BE THE
BANK series is a collection of ebooks designed to teach you how to invest.
No, you do not need to know everything or read financial jargon that is
difficult to understand (although I will try to teach you the jargon as we go
along). These books will teach you how to use other people’s financial
knowledge to pick investments, how to avoid high fees, how to hire an expert
when you feel you need one (if you need one) and how to assess your own
risk tolerance.
Risk tolerance is how much you are willing to lose on an investment.
There are investments that are virtually risk free (because they are backed by
the Federal Government) but those investments have a lower interest rate like
the savings account example above. (Some of these low risk investments
should still be in your savings plan but these ebooks suggest the best type and
where to find the ones with higher interest rates.)
After reading these ebooks, you will know how to determine risk so you
do not get into an investment that you are not comfortable with or worse, that
causes you to lose the money you invested. There are definitely get rich quick
schemes on the internet that prey on people that do not know how to invest.
(Options or Commodity Trading – such as gold or cryptocurrency is very
high risk and, with some sites, that have their own investment “platform”, it
might be “rigged” for higher returns for the site owners. So, Options Trading
is for professionals with a lot of money to begin with.

This ebook is not a get rich quick scheme. But, it will teach you how to
reach long-term goals like buying a house or having a comfortable retirement
or creating passive income so you can retire early. They can also teach you
how to reach short term goals like going on a great European or Asian
vacation while other people go camping. Or, the money you invest, might
allow you to buy that car, motorcycle, or boat you have had your eye on.
More importantly, these ebooks will give you the power to walk into a bank,
speak with a manager and say, “I don’t need you or your high fees anymore.”
This Introductory ebook is full of information about how you can open an
investment account, where you should open it, how to avoid high fees, how
to control debt (so it does not control you) and how long term investing looks
over time. In other books of the series, I will break down specific information
for each type of investment; mutual funds, stocks, and ETF’s, bonds and
other investments. You can pick and read about each investment as you need
them or buy the entire series as it becomes available. I was a successful
investment banker for over 15 years in the USA. I conducted investment
seminars for my clients. Many clients told me that I make investing simple. If
you are looking for technical information, this is not the book for you, but if
you want to learn about investing and take more control of your financial
success, please read on.
 CHAPTER 1 – Take control of your
money
YOUR PAYCHECK
Many people have too much tax taken out of their pay checks; either
because they do not know how much to take out or because they want a
bigger refund at tax time to use for a vacation in June. It is actually better to
save the money yourself, make interest on the money, and then pay the IRS at
tax time. Use your Human Resources department for help with adjusting
your withholding to the minimum amount. However, if you are sure you will
spend the money instead of saving it, then, leave your pay check as it is, you
do not want to run short at tax time. If you know you can save it, then why
give the IRS your money early since you can use it to make interest income
during the year? Your pay checks will be bigger but, remember to pay
yourself first, meaning put the tax money away for April. Open a designated
High Yield savings account if you have to. The amount of interest income
you make may not be a lot but, even enough for an unexpected dinner out is a
bonus, right?

Withdrawal video

*video by napkinfinance.com

High Yield Savings Accounts do not pay the highest interest but they do
typically have higher interest than your local bank. Most online banks allow
you to sign up online and make monthly deposits via a link to your checking
account. The blue link above will give you information about the accounts
that will pay you the highest interest.

High Yield Saving Account Video

*Disclaimer I do not hold money in Marcus. But I already have other

high yield accounts.

**video by Matt Welter

 EMPLOYER 401K
Many people do not take advantage of free money offered by their
Employer. This makes my head spin. Why? Why? Why? When I worked as
an employee, I would often scratch my head and wonder why my co-workers
refused to opt-in to this great savings plan. Most did not because they thought
it was confusing to pick investment options. So what is a 401K plan?
The 401k plan is a retirement (or insurance) plan, that an Employer
chooses, to help you save for retirement (or pay for medical emergencies).
Back in the day (long ago), companies offered pension plans which were
good for employees but became expensive for companies as profits became
more competitive. The 401K plans have pretty much replaced pension plans
when the government realized many people were not saving for their future
retirement and struggling companies were not able to offer pension plans.
With 401K plans, there are investment caps in place either by The Plan
and/or the Internal Revenue Service (IRS) regulations that limit the
percentage of contributions. (I have no idea why they limit the amount of
money you can save for retirement, it makes no sense but the IRS Tax Code
does not make sense so…) Contributions are salary that you choose not to
take at this time, but that are deferred until you retire. The sweet part of 401K
plans is that the Employer can, and usually does, match a percentage of the
money you contribute. Meaning, they pay you EXTRA money. It is an
employee benefit that many employees don’t take advantage of.
There are restrictions on how and when employees can withdraw these
assets (the money), and penalties may apply if the amount is withdrawn while
an employee is under the retirement age as defined by The Plan. Most 401K
Plans allow the employees to choose their own investments from a group of
investment products (such as mutual funds, stocks, bonds). This may be the
reason why so few people enroll in the Plan (fear of picking the wrong
investment product, maybe?). However, some employers hire professionals
to manage the employees’ investments.
Following is an example of the growth of the 401K plan for an employee
contributing $4,000 per year.
 Pay attention to the dark blue. 319,486 – 245,758 = $73,728 which
represents the employer’s total contribution over time at 3% interest rate
return. That figure is over a year’s worth of salary for FREE!! Here’s a link
to the calculator so you can put in your own numbers.
Many employers require you to be vested (working) in the company
before you can sign up. This means you must be an employee for a minimum
number of years (or months) before you can sign up. Find out if you are
eligible. If you have been offered the plan and did not signup, do it now.
Once you are signed up, you may need to pick investment products.
Look at my next ebook about Mutual Funds for help on picking mutual
funds. These are usually offered in 401K plans because of their diversity (the
risk spread over many investments) – remember the saying “Don’t put all
your eggs in one basket”? - it defines diversity.
Mutual Funds – an investment product made up of many different
companies’ stocks. (Stocks are pieces of ownership in a company and
companies sell these pieces to raise money to improve the company.)
Mutual Funds have different investment objectives, for example, higher
growth, steady income, or a balance of the two. Funds can also target a
certain type of business like energy, global investing, or a group of
companies that have been around for a long time like Ford, A,T&T and
Johnson & Johnson. Because Mutual Funds hold stock in many different
companies, the risk is spread throughout the entire group -- meaning less
risk than holding an individual stock (diversity).
DEBT
Debt is a very personal thing. Some people avoid talking about it entirely
but the sad truth is that people are not educated about debt. Credit card
companies don’t tell you that a 20% interest rate paid as a minimum monthly
payments can keep you in debt forever but they do have a LOT of
information in fine print, that most people don’t read, warning of the risk of
default. If your parents taught you about the correct way to handle debt, go
give them a hug because they gave you a lot of power. Power? Yes, power.
Because, even though Debt is not taught in school, our credit score, or how
we handle debt, affects how much money we have in the long run.
A Credit Score is a number value assigned to how well you make
your payments and how well you handle money.
Are you ever late paying your bills? Did you neglect to pay off a loan?
Did you let someone else use your credit? Even the amount that you pay
monthly on your credit card bill affects your credit score. In fact, all of these
can affect your credit score negatively. There are also things that affect your
score positively like making your payments on time, using credit wisely,
open a maximum of 3 or 4 credit lines and keeping an eye on your credit
report. Employers, especially in financial institutions, can use your credit
score to determine if you are a good employment risk. Landlords can look at
your credit score to determine if you are a good renter. And, banks definitely
use credit scores to determine whether you can buy a car or home (and how
much they can get in interest on loans) and sometimes even whether you can
open a bank account. Your credit score is powerful. Debt reporters (the
people allowed to put information on your report) usually include creditors,
lenders, utility companies, debt collection agencies and the government
courts.
Most U.S. consumer credit information is collected and stored by the
three national traditional consumer reporting agencies: Experian (formerly
TRW Information Systems & Services and the CCN Group), Equifax, and
TransUnion. You can get a copy of your report from any of them for free
once per year (a federal law). These companies are monitored by two
government bodies, the Federal Trade Commission (FTC) which oversees all
consumer reporting agencies and the Office of the Controller of the Currency
(OCC) which regulates all bank reporting.

There are other credit reporting companies as well and you can find out
about them at this link:
Consumer Financial Protection Bureau

When a lender is determining whether to give you credit, they order a

credit report showing your credit history and buy a credit score. The FICO
(or Fair Isaac Score) was established in the 1960’s to help institutions with
risk management. The scores are from 0 to 850 with most between 300 and
800. While consumer agencies state that the FICO score will not tell if a
person is a good or bad person, most lenders will not deal with people that
have low scores because of the risk to their potential profit.

300-629: Bad credit

630-689: Fair credit, also called “average credit”
690-719: Good credit
 720 and up: Excellent credit

To generate a credit score, you need at least one account opened for 6
months with no indication of deceased individuals on the report. You must be
alive!
There is a lot of information about credit and how to improve credit both
through the credit protection agency and the credit bureaus themselves. For
the sake of investing, I will assume that you have consistently paid your debt
and have a Fair credit score. While low FICO scores can prevent you from
buying a car, house or opening a bank account; great credit scores can give
you access to the best loan rates and allow you to open new bank account
easily. I urge you to order your credit reports now and check your credit
scores. In fact, to me, signing up for credit monitoring is worth it because
you will be notified if anything unusual appears on your report. In this age of
information technology and the risk of your information being hacked, the
last thing you want is to have erroneous information sit on your credit report.
For any citizen living outside of the USA, the reporting bureaus will not send
a credit report overseas and, for some reason, they are not accessible online to
anyone outside the USA. If you want to get a copy of your credit report, you
must have an address in the USA and ask the bureaus in a letter to send a
copy of your report to you.
Here’s a graph about why your credit score is so important.
 How do you get a great credit score? While the credit bureaus will not tell
you exactly how their scores are determined because it is a mathematic
algorithm (that you might not understand anyway), I can tell you that the
scores are based on categories. These categories, with their emphasis on the
score in brackets, are: payment history (35%), amount owed (30%), length of
credit history (15%), new credit (10%) and type of credit used (10%). All of
these categories are taken into account in your overall score - no one area or
incident determines your score and time changes your score. All the bureaus
agree that you should do the following to improve your overall score:
1.Check your credit, at a minimum, annually to make sure erroneous
information does not appear on your report. (In my younger years, I had
debt problems but learned quickly that I needed to clean up my credit. I
paid for credit monitoring at about $200 per year until I got my credit
cleaned up and my scores were at 800, this took a few years. Now I get
a free report every year to keep an eye on my own credit. Mine was not
erroneous information, but bad planning and ignorance of how to handle
debt. Now I know!)
2.Set up payment reminders so you are not late on your payments.
 Avoid late payments at all costs. Put your smart phone to work with
alarms!
3.Reduce your debt. A mortgage payment, rent payment or a
reasonable car payment are fine but do not go crazy with credit card or
department store debt. I will talk about this more in this Chapter .
4.Collection accounts (debts that are sold to a collection bureau) stay
on your account for 7 years so pay off a collection as soon as you can or
better yet, do not let an account go into collection by checking your
credit more often (I talk about this in depth in my future ebook
Repairing Credit.)
5.Just about everything negative stays on your credit report for 7
years but the more time that goes by and the better your report looks, by
doing the things stated above, the faster your scores will improve.
6.Never, and I mean never, let someone else use your credit. (Even
and especially family members, including a spouse, because it does take
years to repair credit, if it is damaged, and the people that are asking to
use yours have damaged their own.) So, my best advice is to keep your
debt limits and savings information private.
When banks, mortgage companies, or lenders in general, are determining
whether to lend you money, they look at your debt to income ratio (DTI).
With some lenders, who have online applications, the software automatically
determines your DTI from information you enter into their form or from your
credit report. If it is too high, you are automatically declined.
Debt-to-Income ratio is your total debt (credit cards and car
payments) divided by your total monthly income. The debt amount
excludes your house or rent payment. For example: John has a
$500/mo car payment and $300/mo. total monthly debt from credit and
department store cards showing on his credit report (minimum monthly
payments). His monthly salary is $2500/mo. $800 ÷2500= 32%. His
DTI is 32. Most lenders have maximum DTI at around 45% but,
subprime or low credit score lenders have higher DTI maximums, or
disregard the DTI, but their interest rates are HIGH to offset their risk in
lending to borrowers that are unlikely to be able to pay all their debt.
If you have a high DTI, you probably have a low credit score but, you can
have a better credit score, by lowering your DTI… by paying down your
debt. Which usually means, stop shopping. If you reward yourself for doing
unpleasant things by going on a shopping spree, try to think of other
rewards. I found that it was not actually buying things that I enjoyed. It was
the experience of going to the mall with a friend, walking around, seeing
other people and maybe having a coffee. If I need something, like a new pair
of jeans, I try to find the best value for my money and I have found that I lost
my desire for designer clothes. I still buy long lasting items with a designer
label, for example, a leather purse with a classic style or a piece of luggage or
jewellery that I will use for many years. But, I only buy luxury items if I
have the cash for it.
CREDIT CARDS
Credit cards can be an ally or a curse. As long as you control the credit
card and it does not control you, it can be a powerful tool for using a bank’s
money.
First, I assume you have great credit. If you do not have great credit, do
not get a credit card until you do.
Next, you must shop for the best credit card and interest rate to meet your
needs.
Then, use the credit card in only a few scenarios:
1.You have cash but want to take advantage of the 20-30 day free
interest period that most credit card lenders allow to pay for a purchase.
In this scenario, you already have the cash saved in the bank. But, you
are making interest on your money so you take advantage of the 30 day grace
period that lenders allow for you to make your first payment. Instead of
paying the balance immediately, you note the due date for your credit card,
which is when additional interest (which you have to pay) is added to your
outstanding balance and two days prior to that due date; you put a reminder
on your calendar to pay the balance in full. When you pay off an outstanding
balance prior to the Due Date, no interest is added so your credit report is
happy because the item was reported to your credit card account, but
immediately paid off.
2.You are able to pay off the credit card within 4-6 months.
In this scenario, you need to make a large purchase, like when your
refrigerator conks out. You already know how much per month you put into
savings so, instead, you allocate that money for 4-6 months to buy a new
frig. Multiply the monthly savings by 4 (or 6) to figure out how much you
can spend on the new refrigerator. You go shop for a fridge in your price
range, use your credit card to purchase it and pay it off within the 4-6 month
timeframe. Better yet, in this scenario, make sure you go to your credit card
or bank’s website to see if there are any consumer promotions at local
retailers. Sometimes, local banks will offer 6 months free interest if you use
their VISA or Mastercard. Take advantage of these interest fee periods.
However, avoid Retailers that make the 6 month free interest claim only to
increase the price of the merchandise. If the bank makes the interest free
claim, it is probably a good deal for you, if the retailer makes the claim they
may raise the price of merchandise. Look at the sign at the retailer carefully
to see if they are offering the free interest or the bank is. It takes shopping
around. In years to come, if you follow my advice, you should have enough
money in your savings account for an emergency fund plus retirement and
this scenario will not be needed.
3.You are on a vacation or business trip and need to access your cash
or exchange currency.
Many credit cards offer perks to travellers, which is why I want you to
determine why you want a credit card. This scenario is the best reason to
have a credit card. Domestic and international travel is much easier and
cheaper with the right credit card. Some credit cards do not charge fees at
foreign ATM’s (which can be expensive at some banks!), some offer free
flight insurance and some are attached to flight mileage plans that offer free
flights or discounted hotels. Most banks that offer travel cards have better
rates at local ATMs for currency exchange when you use your credit card
instead of going to a money exchange kiosk and with a credit card you have
more control over the amount of foreign currency you need. Book your flight
and hotel online and pay for it up front. You will be able to pay off the trip
before it has even begun and you will know how much you can spend during
your trip. Use your credit card for purchases during your trip but have a daily
budget in mind.
These scenarios above are (the only) reasons I suggest, for new investors,
to use a credit card. After your credit score is 800 and you have over $50,000
saved, you can start to use credit cards responsibly for other expenses. But,
always place a calendar reminder to pay the balance in full and know how
much you can spend monthly. Visit your credit card account online often
during the first few months of using your card so you can monitor your own
spending, and, if the balance is rising, put the cards away and use the cash
you have. Break the cycle of constantly carrying a credit card balance. Some
credit cards, through banks offer points programs that allow you to get
discounts at retailers nationwide. If you use a credit card responsibly and pay
off the balance monthly, you can get a lot of discounts or free perks.
I always have my credit cards in my wallet and I do use my credit cards
to purchase groceries (for the points program) but, I always pay off the credit
card balance before it is due. I made a mistake recently when I purchased my
cell phone by putting it on my credit card to take advantage of free interest
for 3 months. I did not put a reminder on my smart phone to pay the balance
and forgot to make the payment. Interest was added to my credit card
balance and I was sent a notice that my payment was due. It took me a while
to figure out why I had a $200 payment to the retailer (they were starting a
series of monthly payments which would have caused a late payment if I had
not checked my credit card balance). Since it was 4 months later, I had
forgotten what I bought and it was not until I called the company, that I
recalled putting my cell phone on the 3 month free interest program. I
immediately paid off the balance in full, but was disgruntled that I ended up
paying more for the phone, because I failed to put a reminder alarm of the
payment on the phone. Even though I offset the payment, because I missed
the due date, I paid more in the long run. So, even sophisticated investors
can sometimes, make a mistake.
On a positive note, since I do check my credit card balance monthly, I
once saw unexplained charges from France on my credit card. I called the
credit card center, explained what I saw on m statement. The customer
service rep asked me several questions about 3 other charges that had not yet
shown up on my statement but were pending in their system. I explained that
I was in Malaysia and provided proof by way of hotel charges at the same
time as the France charges. The credit card company said they would open
an investigation, an investigator would call me for more information and the
charges would be reversed if their investigations proved that I had not made
the purchases in France. They also immediately cancelled my card and sent a
new card that arrived 2 days later in Malaysia. The investigator never called
me and the charges were reversed the next day. I called the credit card
company back and was told they realized immediately that the charges were
not mine because it was part of a larger investigation of fraud.
So, yes, you need to keep an eye on your credit and bank account
statements. I look at my balances via smart phone apps a couple of times per
month.
 END OF CHAPTER ONE ACTION LIST

Decide if you should change your withholding allowance on your pay

check.If so, open a High Yield savings account and start saving money for
tax season.
Sign up for a 401k with your employer.
Order your credit report. Analyze your report to see how you can pay
down debt.Look for anything new or unexpected on the report and read the
entire report; if you find something negative, contact the credit bureau .
Determine whether you need a credit card by reading the (ONLY) 3
reasons to have one in this chapter. If so, shop for the lowest interest rate
card. If you already have a card, determine its interest rate (on the disclosure
forms) and if you can qualify for a lower rate, pay it off first, but do not close
your old card. Leave it open on your credit report with a zero balance to
show you handle credit well. Open the new lower interest credit card to use
as stated above.
 CHAPTER TWO – Time Value of
Money
Why should you invest right now? The simplest answer is the Time Value
of Money.
When you put money into a bank or investment product, the bank pays
you a stated interest rate. It is similar to when you borrow money from a bank
to buy a car or house, the bank charges you interest (a fee) for letting you use
their money until you make all the monthly payments to pay the initial money
back plus the agreed upon fee.
The opposite happens when you put your money in an investment, the
bank uses YOUR money (along with the money from all the other investors)
to fund various banking operations including lending money for cars and
houses. (This is a simplistic view but basically they are using your money.)
Because you have so generously agreed to place your money with the
investor (so they can use it), they pay YOU interest (the fee) -- so in essence
You Are The Bank.
THE FORMULA
In general, the most basic Time Value of Money (TMV) formula
takes into account the following variables. (You can skip this as I have a
calculator below but, it is good to know when you are actually inputting
numbers into the calculator.)
FV = Future value
PV=Present value
I= Interest rate
N=Number of compounding periods per year (daily 365, monthly
12, yearly 1)
T=Time (Number of years until you use the money).
The formula for TVM is:
FV = PV x (1 + (i / n)) ^ (n x t)
To make it easier, here’s a calculator.
But basically:
You put 1,000 (PV) in an investment product with 6% (I) interest
compounding monthly(N).
At the end of one month(T=1), you have $1,005.00(FV).
 At the end of one year. 12,397.24 (T=12). Why not $5 X 12 months?
Because each month your balance increases with the interest you have
made each month. You start with $1,000 balance, then at the end of the
1st month $1005.00 (which becomes the new PV) X 6%, then at the end
of month two $2,015.00 (becomes the new PV) X 6%, etc. and each
month the interest rate is applied to that month’s balance.
Here is a graph that shows compounding interest over time:

As you can see, the younger you are when you start investing, the more
money you will have in retirement. HOWEVER, you do not need $10,000 to
invest. In some cases, you can start with $50. This chart does not take into
account monthly investments or dollar cost averaging. The chart above only
has one investment of $10K initially and no additional investments. I cannot
stress enough how important it is to get into the HABIT of investing regularly
NOW. You will see why below. Your money can make money for you
without you working for it (beyond picking good investments).
Dollar cost averaging is making monthly payments into your
investment to take advantage of the best price. Most investment products
are tied to the stock market which goes up and down. Some days the
price are high, some days the prices are low. Just like at the market, you
buy more when products are on sale (low priced), your monthly
investment can buy more when prices are low so the overall average
cost is much lower.
In the scenario below, Andy makes a lump sum purchase in May (one
time). However, Brenda uses Dollar Cost Averaging and automatically
makes $100 investments each month. At the end of 3 months, they have
both invested $300, but Brenda’s method provided a higher investment
return at the end.
 In addition to placing your money in an investment that includes
compounding interest, you should make automatic payments into your
investment monthly.
Automatic payments can be made either through the investment
broker or into your bank account. In addition, your bank may have the
option to set up automatic bill payments. Use this feature to set up
monthly payments to go into your investment account. Or, if you do not
have online bill pay, at the least, put an automatic reminder on your
phone calendar to invest and set it monthly immediately after payday. If
you get paid weekly or bi-weekly, you may want to put the money in a
jar, set your calendar and deposit the funds yourself on the same day
each month.
Another way for your money to grow without you having to do anything
(passive income) is to pick investments that pay a dividend. Corporations
raise additional money to grow their business by selling bonds. Investors buy
the bonds which provide money for the company to grow. Companies can
also sell stock or pieces of ownership in their company to investors to raise
money to grow the business. When the company profits, the company
reward the investors with dividends on the stock. Both of these ways are
available to investors to make passive income by holding dividend paying
stocks or bonds.

A dividend, is an amount of money that a company pays its investor

for each bond they hold when the company is doing well. Businesses
 are in the business of making money so corporations reward their
shareholders (the people investing in the stock offered by the company)
for their help in providing the money for the company to grow. The
corporation rewards the investors by paying a monthly, quarterly or
annual dividend. This, in turn, attracts more investors. The stronger and
more successful the company, the better the dividend is. Dividend
amounts are usually set by the Board of Directors for the corporation
and are announced to their shareholders. (If you own a Mutual Fund,
you may not be notified, but you can look at the amount of the dividend
in your own account.)
Corporations are not the only entities that pay dividends, some cities,
states and the Federal government also raise money to provide infrastructure
projects in the same way. These investments are called Bonds. Bonds do not
typically have rates as high as stock but neither are their prices as volatile (up
and down). And, because Bonds are backed by governments or strong
companies, they are typically safer investments. However, beware of
advisors selling bonds for unknown companies or cities or projects that are
small and unknown. If you are offered Bonds for Microsoft, it is probably an
OK investment but if you are offered Bonds to build a new public park in a
small town, you might decline (unless it is a small amount, you can afford to
lose the money, and it’s of personal interest to you). For more information
about Bonds, please read my ebook about bonds. I have a unique system for
using Dollar Cost Averaging to buy bonds monthly to provide monthly
income in retirement.
Bonds are investment instruments that companies, cities, states or
other municipalities can use to raise money for special projects.
How else can you make money on your investments?
We have talked about 401K’s which are tax deferred but which are tied
to a contribution match by your employer. In addition, you should have most
of your money in other tax deferred investments if you main goal is a
comfortable retirement. You have probably heard of IRA’s during tax time.
They are Individual Retirement Accounts (IRA’s), or for Self-employed
people SEP IRA’s. These products allow you to save money for retirement
tax free in the year that the investment is made up to the maximum annual
allowable investment amount. And, yes, the IRS will require you to pay tax
on the investment and any interest income you make on your investments.
However, most investment products can be purchased within an IRA account
so the IRS allows you to pay the tax when you retire. But, normally during
retirement, your tax rate bracket is much lower (because you are not working
or working part-time.) A Roth IRA is different than a regular IRA in that the
money that you invest is taxed already so it can be withdrawn at any time,
however, the interest on the amount invested is not taxed and cannot be taken
out (without penalty) until you reach retirement age.
How much should you put in each type of account?
You should put as much as you can into your 401K plan first, then, fund
your IRA plan which has a yearly maximum investment allowance (check for
maximums online), after that, if you are able, put money into a taxable
account. There are times in your life when you may need money before you
retire or may be able to retire early so make sure you have some money
outside of these retirement accounts. Retirement accounts that are regulated
by the IRS will incur both taxes and early withdrawal penalties if the money
is removed before retirement age so plan wisely. (The IRS does waive this
penalty for certain situations so visit their website to better understand the
penalties.) Tax advisors can help with questions about IRA’s. Do not be
afraid to ask when you have your taxes prepared in April, even if you are
sitting at the local H&R Block and only see the accountant once per year. Get
to know the accountant even if you only see them annually. A friendly
relationship will provide more information and accountants can give you tips
on how to save the most money on your taxes now and when preparing for
retirement.
KNOW HOW MUCH YOU CAN INVEST
I left this for the end of Chapter Two because I think that most people
purchasing a book about investing, already have money that they want to
invest. But, if you know that your checking account balance is growing (or
you want it to grow) but have not looked at a budget, it is time for you to sit
down and crunch some numbers.
Here is a worksheet you can use. Fill it out and be honest. If you have
never saved money, try to save some money in a savings account, which is
automatically transferred monthly when you get paid, to see if the amount
you budgeted is realistic. Save money for the next 3 months. While you are
saving, read my other ebooks on investing (or finish this book and complete
the checklists). Also, think of ways you can cut spending while giving
yourself an occasional reward. For instance, if you eat out every day with an
average cost of $10, try packing a healthy lunch, a few days per week then
use part of the money to buy a smoothie after your run in the park on
Saturday ($10) and the balance ($20) put in your savings account. WOW!
You ate healthy, exercised and saved some money. All good habits and
healthy rewards!
END OF CHAPTER TWO ACTION LIST

Use the compound interest calculator to see how much your

monthly savings could grow. You need to know your realistic goal as a
target!
Sign up for a 401k with your employer if you have not already
done this in Chapter One or if you are self-employed, find an advisor to
help you set up a SEP IRA.
Do some research about IRA’s if you know nothing about them.
Here is a website that will give you all the facts for 2021.
Determine how much you can budget for savings. If you have
already signed up for a 401K, you will see your pay check adjusted
slightly (but probably less than you expected as this is tax deferred). So,
use the pay check after your 401K is established to calculate your
monthly budget. IRA maximum contributions for 2021 are $6,000 per
year (more if you are over 50) so a monthly payment to your investment
account of approximately $450 would fund your IRA account. If you
have additional money to save, place it in a taxable investment product
and buy my Mutual Fund Ebook then the Stock Ebook to help you
choose investments to buy. Bonds can be added to your portfolio for
dividend income but are usually added as you get older since the interest
rates are lower.
 CHAPTER THREE – How to diversify
Investments and Your Risk Tolerance
“Don’t put all your eggs in the same basket”. It is a familiar quote
and true especially for investing. Do not buy all one stock or one bond
or have one savings account. Diversify your money. Why? After all, it
is easier to keep track of it.
As I said previously, different investments have different risk and
different interest rates. Just like DCA (Dollar Cost Averaging), when
you buy an investment monthly to take advantage of the difference in
price, you can take advantage of the fluctuation in interest rates by
buying different types of investments.
Diversity and Risk Tolerance go hand in hand. So, I am going to
talk about Risk Tolerance and then come back to Diversity again.
Risk Tolerance is how much you are willing to lose on an
investment.
I can hear you saying! “Stop right there, I do not want to lose any
money so, why am I reading this book. I work hard for my money!”
Good point! And, if you said that, then your Risk Tolerance is 0 (Zero).
You should keep your money under your mattress at home (although….
what if your house burns down? or a robber knows that’s the first place
to look?) Hmmm… Ok how about a bank vault? Even they get robbed
but they are insured – but only up to $200K per individual investor. My
point is…. nothing is 100% safe. But, if you did say the above
statement, you should pick investments that are Federally backed and
insured and you should also know something important about the stock
market…....
What goes up, must come down.
Stock markets do crash. There was a famous crash in the 1920’s and
another one in our lifetime in 2009. However I lived through 2009,
because I know ‘What goes up must come down”, I also know the
reverse is true, “what goes down will come up”. And, historically, the
stock market has gone up more than down. So, instead of panicking and
selling everything (like a lot of people did in 2009), I ignored my
portfolio for about 3 years. That’s right, I did not look at it at all even
though I saw what was in the newspapers. Before the crash, I saw what
was happening, I saw banks starting to go under so, I adjusted my
investments as conservatively as I could and then I walked away from it
(symbolically). After all, this money is for retirement and I was not near
retirement age. The stock market recovered and when I looked at my
portfolio again, it had gone back up to where it was before the crash in
2009. Yes, I lost a few years of interest (meaning, my investments did
not rise higher during that time) but, it was no worse than keeping the
money under my mattress. And, because I kept a combination of stocks
and bonds (diversified), the account only went down a third during that
time when, overall, the stock market lost 50% of its value. So, my risk
tolerance (on a scale of 1 to 10) is at about a 7 or 8. It is because I know
that the stock market has been around for a long time and performs
based on historical data, the companies I invest in are companies that
have been around for a long time – over 50 years, I diversify my
accounts, and I do not need my money within the next 10 years. If any
of these change, my risk tolerance will change.
How do you check your own Risk Tolerance?
There are many financial investment companies that have their own
risk assessment forms or online tools. Studies have been done about
how effective these assessments really are. There are three things that
affect the questionnaire.
1) The amount of money you have – If you have $10,000 and lost
$2000 in the stock market, you may feel different than someone that has
$1,000,000 and lost $200,000. I mean they have $800,000 left, still
enough to retire.
2) How much do you need in retirement or for your goal? Do you
have enough time to hold lower interest rate investments and still reach
the goal or is the interest rate or timeline forcing your investments to be
more aggressive?
3) How do you feel about the investments? If you do not know
anything about stocks, bonds or even bank accounts, maybe you would
panic and sell all your investments. That is why it is good to continue to
learn and do research on various types of investments. If the stock
market was doing it’s normal thing, which is up and down movement,
but you feel more comfortable with a fixed rate, you might want to look
 at other investments.

Keep these three items in mind when completing a risk assessment

form and know that your risk tolerance will change over time. Try to
avoid changing your investments too often. Typically, I look at my own
portfolio about 4 times per year, unless I want to buy a new investment
(most of the time I have automatic monthly buy orders to invest (DCA)
into a mutual fund account). If I decide that I have enough in that fund,
which for me is $20-50K), I will research a new fund and, I may look at
research for a few weeks before deciding to buy the new investment. I
typically decide on 2 or 3 promising funds and then do a lot of research
on each fund and the market sector outlook for each type I go into detail
about how I pick mutual funds in my ebook about Mutual Funds.
It may seem like, when you are reading this book, that I spend a lot
of time on my investments. But, as I said, I only look at my portfolio 4
times per year. Before I look at it, I may spend 15 minutes per day for a
week or two to find out what is going on in the market. Then, when I
open my portfolio, I already have a good idea where the market is
headed or if there are any new sectors that I need to look at.
A Sector is a category of investments like healthcare, technology,
energy, utilities or consumer goods. For instance, a mutual funds from
Vanguard is called Vanguard Healthcare Fund. It holds 80% of its
investments in healthcare related investments and the holdings include
the following companies in order of number of stock shares held:
Bristol Meyers, Allergan PLC, United Health Group Inc., Eli Lilly and
Company, AstaZeneca PLC, Merck and Co., and 4 others. All of these
companies are big name healthcare companies and as an investor, not
only can I look at this investment, but I can look at each individual
company, if I want.
If you are new to investing, yes, you may spend more time researching
investments but, as you look at more and more investments, you will become
more comfortable, your risk tolerance will go down and you will not spend as
much time on investing. Or, you may want tochange your career and become
an investment banker and spend every day doing it.
When you pick investments, you should keep in mind that you are in this
for the long term. You are not a day trader (someone that trades on the stock
market daily) for the bulk of your money. But, what is the best strategy for
diversifying your money? This depends on your risk tolerance which is why
you must assess yourself and your overall feelings about money, the financial
market and the length of time you have to invest. One piece of information
that may help the timeline is the Rule of 72.
The RULE OF 72 - The 'Rule of 72' is a simplified way to determine
how long an investment will take to double, given a fixed annual rate of
interest. By dividing 72 by the annual rate of return, investors can get a rough
estimate of how many years it will take for the initial investment to duplicate
itself.
For example, the rule of 72 states that $1 invested at 10% would take 7.2
years ((72/10) = 7.2) to turn into $2. In reality, a 10% investment will take
7.3 years to double ((1.10^7.3 = 2).
When dealing with low rates of return, the Rule of 72 is fairly accurate.
This chart compares the numbers given by the rule of 72 and the actual
number of years it takes an investment to double.

Once you understand that saving a little for a long time, in good
investments, will reap the rewards, it becomes less important to worry about
about which sectors you invest in, as long as you pick popular companies that
have been around a long time. Some billionaires have said that even putting
all your money in an index fund will provide a great retirement as long as you
start early.
INDEX FUND an index funds is said to provide broad market
exposure (diversification), low operating expenses and low portfolio
turnover. An index fund is a fund which has a broad mix of the entire
stock market in its portfolio and typically includes a stocks from many
 sectors.
If you watch the News, browse FB or Google, you can find trends and see
which sectors are in the news. For example, at the current time, retail stores
are closing as consumers turn to online shopping. In this scenario, I would
not invest in storefront sectors but would concentrate on investing in the
companies that work to promote online sales. In fact, at the current time, I
hold investments like Amazon that promote online sales.
The only caution, I would say is investing more than 10% of your wealth
in one stock or commodity as these are very volatile, hence very risky.
COMMODITY a raw material or primary agricultural product
bought and sold on the market. For example, gold, copper or corn and
rice.

Stocks and Commodities are bought and sold daily with a lot of
movement, up and down, in the price. They hold one company or one
product which is bought and sold on the market. A mutual fund or ETF
(Exchange Traded Fund), holds many different kinds of stock, so does not
fluctuate as much. Following are two price charts which show the closing
prices for two investments. The first one is a commodity, Crude Oil (WTI),
and the other is a Vanguard ETF (VDC) with several Consumer Staple
Companies in the fund portfolio. (Vanguard is an Investment Broker firm
which packages stocks into mutual fund porfolios based on sector or type of
investment style.) As you can see, the single commodity of oil has
aggressive peaks and valleys with a sharp dive down early in the week but it
appears to be recovering. The bundle of Staple Goods from Vanguard, sold
as one ETF, has a much less volatile line over the week and, although you
can see price movement, the line is more or less on the same level with a
gradual rise. This is why investing in bundles of stock is safer and easier on
an investor’s nerves. The risk is diversified over many different companies,
even though they are within the same sector. You can invest in an even less
volatile fund by investing in an index fund that takes investments from many
different sectors which spreads risk out over many different types of
businesses.
END OF CHAPTER THREE ACTION LIST
 Download an app or go to website like www.fncalculator.com.
This page has many different calculators but specificially can help you
to answer the questions in the following bullet point.
Take a risk tolerance survey to get an idea of the type of investor
you are. Think about the 3 questions about investments:
How much money do you have to invest?
How much will you need?
How do you feel about investing?
Be honest.
Read some articles about investing online or in the newspaper.
One website that provides more information than you probably need is
marketwatch.com, but there is a lot of information if you search “market
news”.
Decide whether you want to invest in an Index Fund which
combines many sectors or want to pick your favorite or most
newsworthy sectors. As long as you pick investments in well known
companies that have a proven track record of success, you should be ok,
but do not put all your eggs in one basket.
 CHAPTER FOUR – Where to Invest
When I talk about “Where to Invest”, I am not talking about which
investment to buy. I am talking about the place or financial institution
that holds your investments. Do you want to keep your money under the
mattress (probably not if you are reading this ebook)? Do you want to
keep your money in a bank? Do you want to use an online investment
broker? Do you want to meet face to face with your broker? What
about an insurance company and the investments that your Insurance
carrier sells, are they worth looking at? All of these have pros and cons
that I will talk about in this chapter but the bottom line is, you can invest
with one of the options or all of the options. The choice is yours.
Keep in mind that all of them charge fees for services but the fees
charged vary among financial institutions with some much better (and I
mean more affordable) when it comes to keeping your money for
yourself instead of paying it toward fees. As an offset to fees, some
financial institutions provide convenience for certain services. For
example, banks have their own ATMs and ATM cards that make access
to your funds simple. In addition, some online brokers also offer ATM
cards that may waive fees for local and international ATM’s (think
holiday travel!) so it is smart to shop around.
At the end of the chapter, there is a Word of Caution. Investing is
not a get rich quick scheme. If you buy stock, betting it will go up for a
quick sale, you may lose most of your profit in fees. There is a way to
“Play the Stock Market” by buying stock options but this is for
sophisticated investors and not for a newbie with long term goals and no
savings to speak of. Also, most trustworthy investment companies will
not let inexperienced investors open Option Accounts. Alsom buying
Commodities like gold or oil (because your cousin told you it was going
to sky rocket) is not a good long term strategy. Commodity trading is
very risky as I pointed out in Chapter 3. It should only be 10% of your
total portfolio, if at all (It isn’t in my portfolio since I passed age 30 and
I haven’t missed it). I will talk more about this including Options and
Commodity trading at the end of the chapter. It is a good way to lose all
of your money.
 Warren Buffet is one of the richest men on the planet at the time of
this writing. He is old but his chief way to invest is picking stock
(which he knows a lot about). Most retirees, put their money in fixed
interest rate investments (the opposite of stock) so they can safely hold
on to their money, but Mr. Buffet IS a rich man, so he is probably not
worried about risk. He knows he can afford to lose the amount he
invests and, especially because he is old and will never be able to spend
all of the money he has, it is a great way for him to invest. Even so,
Buffet more often makes more money than he loses in the stock market.
You can too, if you already have $100,000 and are 25 years old and
want to spend $30,000 to buy stock, by all means, go for it. You have
time to recoup any losses.
I am not Warren Buffet and I am not a billionaire but I do not mind
investing part of my money in the stock market even though I am
nearing retirement age. So, this is an individual decision but, if I were
you, I would wait until you have that $5-$100K and have read my ebook
on Stocks before you start thinking about this!
I say this about stock because there are a lot of brokerage firms that
will gladly help you invest in stock. But, on a stock trade, you usually
have a fee to buy the stock and a fee to sell the stock and you need to
understand the “Spread” which is the difference between the price
buyers will pay and sellers are willing to sell for. Again, you need to
read more about Stock, before you start trading and, please do not let
someone else talk you into trading for you.
BANKS
You may think, because of the name of this book, that I do not
like banks. On the contrary, my first “real job” was at a bank and I
think they are a great place to keep your “working capital”. It is
the place you put your salary, pay bills and have available cash to
buy daily staples. It is your cash account and can be a stepping
stone for becoming a long term investor. Again, the most important
thing to do for yourself, is shop around and find the bank with the
lowest fees for the most value. Two websites that I have used to find
the best banks are Finds a Better Bank and Bank Rate .
Both of these sites are based on location. Find A Better Bank is
exclusively looking for banks in your area and has a short questionnaire
to better target the features you want with your checking account.
BankRate has many different types of accounts including loans. I would
check all of these sites and see how they differ with your own scenario.
Try to pick lower fees over convenience since fees, over time, can cut
into any profit you make on your investments.
Banks always look at your credit report and look at your drivers
license information, so make sure your credit is cleaned up before trying
to open a bank account. If it is not, you will be stuck with the account
the bank wants you to have versus the one with the lowest fees. Also,
they may refuse to open an account for someone that has poor credit or a
judgement lien on their credit report.

A judgement lien is a court order allowing a lender to take

valuables, collateral or real property to satisfy an unpaid debt.
Most accounts that pay interest on your balance require a higher
minimum opening deposit. Check to see if the account has a monthly
daily average requirement. If so, the bank may charge a monthly
maintenance fee to keep the account open if your balance falls below the
minimum at any time during the month. Do not open this type of
account if you do not also have a savings account or, preferably a
certificate of deposit, that you can link to the account to keep your
balance above the required minimum.
Let’s look at two scenarios:
#1 An account is open with a minimum balance required of
$10,000. The minimum monthly average balance requirement is
$5,000. The account owner does not have any other savings account.
During the end of the month, before his pay is deposited, he buys a new
TV which brings his balance so $4,500, then his wife goes shopping and
the balance goes down to $4,000. It hovers there for a week until his
salary is deposited leaving his monthly daily average below $5,000. The
bank charges a $15 monthly maintenance fee wiping out any interest
made during that month.
#2 An account is open with a minimum balance required of
$10,000. The minimum monthly average balance requirement is
$5,000. The account owner also opens two certificates of deposit for
$5,000 each and he is able to link these to his average daily balance.
Even with purchases throughout the month his minimum monthly
average never goes below the $10,000 that the two CD’s represent and
he is never charged a maintenance fee. (If you open an account with
other linked accounts, look at your statements the first few months to
make sure the accounts are linked. I had an account once that was not
linked initially but I had the paperwork to prove I requested it and the
bank, reluctantly, refunded the fees.)
Banks charge miscellaneous fees for wire transfers, cashiers’ checks,
travellers cheques, and other services but, ask and often, if you have
linked accounts with your checking account (including a mortgage or
car loan obtained at the bank), they may waive some of the
miscellaneous fees. Look at all the accounts, all of the fees, decide
which features you need, use often, or rarely and choose the best option
with the lowest fees.
Certificates of Deposit are not the best place to make interest on
your money but, everyone should have 3-6 months worth of pay in a
monthly Certificate of Deposit (or two) for emergency cash. If you car
breaks down or the refrigerator conks out, you may be able to pay for it
on your credit card, then, once the CD matures (reaches the end of its
term) you can use the CD money to pay off your credit card balance
before the bank charges interest on the credit card. As an alternative
you can have a money market or savings account. Again, look at
interest rates and fees before making a choice. Certificates of Deposit
typically have higher interest rates and have the added bonus that the
money cannot be withdrawn until the CD term has expired. You can
choose terms for 1 month, 2 months or up to 5 years with interest rates
climbing for longer terms. If you have a longer term CD, some or all of
the interest that you would have made is forfeited if you withdraw from
the CD before the term expires. I usually have a 1 month CD that I can
get access to each month and a 3-6 month CD, only because some of my
investments are overseas and I want to send quarterly investments
versus monthly wire fees. Also, having two CDs instead of one allows
me to use the 1 month CD to pay a credit card but have a higher interest
rate on the other CD for a longer term.
I must remind those of you that are intimidated when going into a
bank, that the bank is a service like any other business. You are the
customer so you are the boss. Do not let an over eager new account
representative at the bank decide which account is right for you. It is
best to go online and research all of the accounts you are interested in
and their fees. Then, when you decide which account is the best, print
out the information about the account, and give it to the new account
rep. Most are accommodating but some will say, that it is not what most
people choose. Politely explain your reasons for choosing the account
and ask if the account they suggest has the same features or if there is
some other reason you should reconsider. If it appears that the account
is still the overall best for you, then politely request they open it.
ONLINE BROKERS
An Online broker usually refers to a company website, not an
individual. These websites may have chat or email capabilities that
allow you to speak with a customer service representative that can help
you with all aspects of investing with their company. They make the
process easy. In addition, almost all online brokers have research tools
and some form of investment education so that you can buy and sell all
investments online once an account is established with no help from the
brokers. However, some companies are more strict than others in the
process of withdrawing your money from the company (or charge higher
fees for withdrawal) so find out what their policies are for withdrawing
funds. Also note that after one ore two initial withdrawals, the process
with these companies may get easier. Keep in mind that every trade
must settle within 3 days after the Trade date, usually abbreviated as
T+3, meaning 3 days after the Trade date (date the buy or sell order is
placed) a buyer must have given funds for the buy order or, 3 days after
a sell order, the Brokerage must make funds available to the customer.
These are business days so a trade theoretically could take a week to
complete. Do not make the mistake of barging into a brokers office
demanding a check the day after you sell stock.
There are many online brokers that also have education as part of
their website when opening a brokerage account.
BROKERAGE ACCOUNT is an account with an investment
company that facilitates investing in stocks, mutual funds, EFT’s, bonds
and any type of investment available at the brokerage institution. They
often have a cash account within the brokerage account that accrues a
small monthly interest rate when your money is sitting waiting for a
trade to complete (trading can take several days to clear or complete).
Brokerage accounts can be designated as Retirement Brokerage
accounts and all money invested in these accounts are in the form of
 IRAs or Roth IRAs.
Examples of online brokers are: TD Ameritrade, Charles Schwab,
Fidelity, E*TRADE, Merrill Edge
When doing research for this ebook, I visited all of these sights and I
want to caution you on what I saw in regard to fees. Some brokers show
trade confirmations as Free in their brokerage fee list which may cause a
newbie to think “Great! The trading is fee!”. But, this only means that they
will send you a confirmation (email or paper statement) once your trade is
confirmed. It does not mean the actual trade is free. For example, I typed
“Fees” in the search box on TD Ameritrade’s website, the first choice in a
dropdown was Brokerage Fees and, when selected, a chart of fees was
displayed with Trade Confirmations and Statements as one of the boxes and,
of course, FREE was displayed. I went back to the dropdown and looked
again and saw farther down the list Commissions, Rates and Fees which,
when opened, was an online PDF of trade costs which were approximately
$6.95 per side (buy or sell) when you make the trade yourself on the internet
or $45 if you called in to have a broker make the trade for you.
TD Ameritrade has stock trading at $6.95, Schwab and Fidelity seem the
same at $4.95, E*trade charges based on volume of trades so this is more for
day traders although their higher volume (over 20 trades) is still $4.95 and
Merrill Edge is at $6.95. You may ask why I care about stock trading fees if
I have cautioned you about trading stock. This is because buying mutual
funds is based on looking at several expense factors but overall, they are
much cheaper to buy than stock. However, the potential gain on investment
in stocks in a single day or week can be much, much greater than a mutual
fund so, at some point, you will want to trade a portion of your portfolio in
stock so it is best to look at all fees. If I were you, I would look at all the fees
of all these online brokers and decide how they could potentially affect you.
Do you need broker assistance? Do you need wire transfers? Do you need
an ATM card? Look at the overall fees and choose the best account for you.
I discuss the expenses of mutual funds in my ebook about mutual funds but
these fees are the same for most brokerage firms. And, most firms have their
own funds that can often be bought for free.
I also talk about stock fees in my ebook on stocks because you may
initially think $6.95 or $4.95 per trade is a lot of money ($10plus) but this is
usually for many shares (pieces of stock) and you price the cost in before
selling or looking at profit.
 HOMETOWN BROKERS
Hometown brokers are individuals that own their own investment
company storefront and allow you a face-to-face appointment to talk about
your investment needs. Do not be intimidated to go to these companies no
matter the amount or lack of funds available to invest. While some brokers
that have a lot of clients may not be receptive to someone with little to invest,
if you come across such an individual, it is not worth opening an account
anyway with someone that does not treat you with respect, so in this case,
find another company. That being said, most successful hometown brokers
know that everyone is a long-term commitment and the more money the
broker helps you to make, the more potential income they will make. The
great thing about a hometown broker is that you can decide how much you
want to be involved in your investments. I owned my own storefront
investment company at one time and loved my business, my clients and the
whole concept of me making money by growing and making money for
others. Also, good brokers call you when they have a potentially good
investment, which they look at all day long daily, so you do not miss out on
good opportunities.
I am going to suggest only one hometown broker because I do not know
where you live or who the local brokers are in your area. Edward Jones is a
nationwide firm with offices in most major city areas and some rural areas.
The brokers are hand picked by the company based on their confidence,
personality, and knowledge of the industry. They attend ongoing extensive
training and they do not charge for their services. Edward Jones has access to
the market that allows them to price into the trades on the secondary market
(the market banks trade in) without affecting price. They have fees for some
services but the fees are comparable to other online brokers. For one to one
service, they are a great option for someone that wants personal help with
investing. Some offices even provide training seminars for new investors.
INSURANCE
Some insurance agents offer some types of investments. However, these
are not normally the best investments, the investments are not liquid,
meaning once you buy the investment you are stuck with it, it is backed by
the insurance company, not traded on a national market and, so, fraud is more
common among insurance schemes. So why would you even consider it?
An annuity is a form of insurance that guarantees a payment upon retirement
through a written contract, whether fixed or variable rate (fluctuating) and
gives a person who has maxed out their IRS contribution another way to save
money tax free. If you purchase one from a reputable insurance carrier or
investment company, the annuity contract can be useful to some people as the
annuity can guarantee a fixed payment for the life of the person holding the
annuity. (Even if the person lives longer than a financial calculator shows that
an investment should last.)
Annuities are a contract between the insurance company or investment
company and the person holding the annuity (the annuitant). It requires either
a lump sum payment of cash or many years of monthly payment
accumulation (an example is buying an annuity for your child and paying for
it monthly as a guaranteed future retirement for your children). The non-
liquid aspect of annuities is why I was never tempted to purchase one.
However, as I get older, they become more appealing since they do guarantee
a long term payout. The word Guarantee is sort of a misnomer because it is
guaranteed by the insurance company backing it. If the insurance company
filed bankruptcy, your annuity would undoubtedly be affected which is why
this should be used at a supplement instead of your sole retirement scheme.
Some older investors who have extra saved money, put their money in
lump sum annuities that pay out a fixed monthly payment for a stipulated
number of years or most often for life. In some instances, the insurance
company is “gambling” that the person who opens the annuity will die early
and the insured is “gambling” that the insurance company will pay the agreed
fixed amount longer than the money would have actually been available if
they kept the money in a savings or CD account. This is a simplified
example below since annuity contracts can be quite varied:
A man, the annuitant, buys an annuity for $100,000. The insurance
company agrees to pay the annuitant $600 for 20 years at a 4% rate of
interest. (The insurance company anticipates it can make more than 4%
interest on the money over the 20% period since it has much more
money than the $100,000 contract to invest.) If the insurance company
can make 8% by investing the money, they stand to make a 4% per year
profit. Also, if the insured dies before the 20 year term, they could keep
the balance of the annuity if there was no rider purchased by the
annuitant stipulating the balance goes to an heir.
In another example, if there is no end term and the annuity were
written “for life”, the insurance company agrees to pay the $600 per
month until the insured dies. If the man lives for 30 years, he has made
 a good investment. If he dies in 10 years, well, he won’t care but the
insurance company will have made a profit. That is why annuities are
good for older individuals that want to have a fixed income to
supplement social security, a 401K or IRA retirement investment
income without having to look at fluctuations in the stock market. Also,
a retiree, after the children have left home, may want to sell a big house
for a smaller less costly house. The difference could be invested in the
annuity to give them additional monthly income.
A WORD OF CAUTION
There are face-to-face brokers or investment companies that may ask you
to invest in investment schemes for gold (commodities), real estate,
currencies, or other investments that are highly volatile and are sometimes
fraudulent. Download a financial calculator app from an app store and find
out online how to use it. If an investment sounds too good to be true, it is.
You can make great returns on the stock market or cryptocurrency at certain
times, but at other times, you may suffer a loss which is why this is about
long term investments. In the long run, investments are very profitable but it
takes time. If a company “guarantees” 20 or 30% interest in the short term, it
is not usually feasible so be very cautious. Also, you do not need a financial
calculator to find out if a $10,000 investment can pay out $1,000 per month
for 20 years. I know 20 years is 240 months ( 20 X 12) and $10,000 divided
by 240 months is $42, so even without a financial calculator I know making
$1,000 per month on that investment is impossible, but I have heard of
people falling for these kinds of scams and losing their $10,000. It is because
they want it to be true. Most investments make 2-8% return but, if you do
some research, some of your investments can make over 10%. I say some of
your investments, because the investment that makes 10% is usually higher
risk and may fall quickly if market conditions change, causing you to lose the
money you gained. That is why it is best to have a mix of different kinds of
investments at different interest rates then, average the rates to find out what
your average return is over time.
I have some investments in mutual funds that have consistently returned
10-12% for the past few years and stocks that have done better than that. I
keep an eye on my investments and the stock market, if I see the market
falling, I might, consider moving part of the money from stocks (not funds)
into a more conservative fund. But only because I am in my 50’s and would
like to preserve the money I have made. If I was 20 years old, it would sit in
the investments, until I regained any loss, and then I would make a decision
on whether the investment was still my best option.
Over time, investments change as consumer focus changes. For instance,
oil companies and the oil and gas companies that have made drilling rig parts
and have created energy through fossil fuels could be counted on for
consistent positive returns. Nowadays, with green energy changing the way
we use energy, I have moved some money into mutual funds that invest in
green energy, battery technology, solar energy and away from fossil fuels.
Not only has it energized my portfolio, it feels good to invest in something
that ultimately helps our planet.
UPDATE:
CRYPTOCURRENCY
I wanted to update this book to include cryptocurrency because they are
becoming more accepted by banks and other financial institutions. However,
because these currencies are not backed by tangible assets, many people think
they will not be around in the future. I disagee, but I want to caution new
investors about investing in cryptocurrency. It should be used as part of an
investment portfolio and you should Dollar Cost Average (DCA) into the
investment.
Dollar Cost Average
Making small recurring investments (monthly, biweekly) to take
advantage of the up and down action of the market. Typically there are
more ups than downs so DCA investors, on average, make more money
long-term. By low, sell when it goes high.

END OF CHAPTER FOUR ACTION LIST

☐ Check with you bank to see if they have investment accounts but
check their fees for investment account (typically they are higher than a
brokerage). Take a few days to compare fees, services and the interest
rates they pay you if you save money at their bank.
☐ Go to investment brokerage websites to see what brokerage firms
offer, their fees, the types of investments offered, investment education
and research tools available and the ease of withdrawing your funds if
you need money.
☐ If you like more personalized face to face contact, find local
brokerage offices in your city. Look to see if there is a website and
search for information about the broker. Check with the Securities and
Exchange Commission (www.sec.gov) to see if the broker is registered
and approved by the SEC. The “Education” tab on the website has a
dropdown which lists “Check Out Broker or Advisor”. Then, make an
appointment and ask all of the questions in regard to fees including how
the broker gets paid, investments offered, investment education or
seminars offered, and the ease of withdrawing your funds if you need to
move your money.
☐ When it is time to renew or purchase auto or homeowner’s
insurance, take time to visit with your insurance agent about investments
that are offered, usually annuities or long-term care investments. Let
them know that you just want information for now.
☐ If you are new to investing, avoid get rich quick schemes. Also,
avoid trading commodities (like gold or silver or currencies) which can
be very volatile. These trades can be part of your entire investment
portfolio once you have a history of investing and know how they fit
into an overall balanced portfolio.
☐ Read Chapter 5 - Cost of Investing so you fully understand the fee
structures to look for with various investments and how they affect your
portfolio.
 CHAPTER FIVE – Costs of Investing
Most people disregard fees because they say, “we must pay it”. But, if
the amount you pay in fees is more than the interest you make on an
investment, how can you save for anything much less retirement?
Bank Fees to watch out for are:
low interest rates - a rate of .10% will only make $10 for the entire
year on a $10,000 investment. Even 1% will only make $100 but, at
least, these investments are backed by government insurance against
loss.
high monthly fees on savings accounts - usually savings accounts
are free but make sure the bank does not charge a fee if the balance
drops below a certain amount. For example, the bank charges $5 if the
balance goes below $500.
withdrawal fees - some banks charge fees if you make more than a
certain number of withdrawals in the month. For example, the
government passed a bill that savings accounts should have no more
than 6 withdrawals per month. But, banks decided to start charging a $5
fee if there are more than 3 withdrawals per month.
loss of accrued interest – some banks state that if your balance
drops below a minimum balance at any time during the month, the bank
will not continue to accrue interest until the balance is brought back up
to the minimum and some also charge a fee because of going below the
minimum balance.
The bottom line with bank fees is to read everything about fees when you
open an account. If you do not understand something in their literature, ask
the bank rep to explain it so you do not get an unpleasant surprise. If the
bank rep does not answer your question or does not know how the fee
stucture works, walk away or ask for the manager. If you have an account
with a minimum balance required, try to link it to another account such as a
fixed deposit that does not fluctuate.
Broker Fees to watch out for:
custodial fees – some brokerages charge a custodial fee that is much
like a credit card’s annual fee. The brokers say they need it to cover
administrative costs but I feel you should not pay it. There are many
brokerage firms that have retirement accounts that do not have this fee
but give good administrative service.
inactivity fee – some brokerages charge a fee if you do not do a
certain amount of transactions per year since they get paid when you
buy or sell investments. If your strategy, like mine, is more of a buy and
hold for retirement, then you should avoid these brokerages.
option fees – when you first start investing, you probably will not do
much options trading but it is similar to trading stock with a price to buy
and sell an investment. The price is typically higher than buying (or
selling) stock so the fee is in smaller print than the stock trading fee.
Trading options allows you to incur less risk than trading stock so
options fees are priced higher. Also, many sites take advantage of new
investors that are not familiar with price spreads (the value between
what the sellers want to make and what the buyers want to pay).
Usually, a brokerage will take a cut of the spread and their platform, or
the downloadable trading site, may be “rigged” to put more money in
the brokers pocket. Lack of skill with investment strategies (the market
signals that help an investor make the decision to act on whether to buy
or sell) can be costly so, avoid options until you feel you have the skill.
I know how to trade options but I have found I make more money
trading the stock instead of the option to buy or sell stock and I do not
have to be tied to my computer which option trades require.
closing your IRA fee – this is basically a fee charged by a brokerage
when you try to transfer or close your account. It means you are paying
to get your own money back. I would avoid a brokerage that has this
fee.
margin fees – I advise against opening a margin account. It is an
account in which the brokerage lends you money to invest. You put
some money into the account and they lend you more money so your
balance to invest is higher. If you lose money, you pay back the
brokerage with interest payments at 9% interest or more. Again, I
strongly advise against margin accounts but, if you do, calculate the
amount of time it would take to pay back any interest accrued for the
length of time you use the funds. Also, make sure you have funds to
cover all losses that could potentially occur in the margin account.
Investment fees By Product
Mutual Funds
Expense ratio – If you want to know how brokers can stay in
business when they do not charge a fee, this fee will answer the
question. The brokerage house holds assets that it sells to investors.
However, they do not offer you the entire return that you could get since
they keep part of the return for management expenses instead of
charging you for services. Many funds have Expense ratios of less than
1%. Again, you never see the charge, but it reduces your return. You
should look for lower expense ratios, under 1%, to reduce your overall
costs.
Loads and Shareholder fees – The term “Load” is a commission
that brokerages charge to buy or sell mutual funds. A Front End load is
charged when you buy a mutual fund. A Back End Load is charged
when you sell the mutual fund and some back end loads are reduced
over time (the longer you hold it the less the fee will be until it goes
away altogether). No Load funds do not charge a commission. Many
No Load funds are as good as the funds with fees so shop around.

Redemption fees – Even if you must pay a Back End Load, you
may also need to pay a redemption fee up to 2% when the fund is sold.
This is a fee that some brokerages charge to pay for administrative
costs. The redemption fee is not charged by or paid to the brokerage, it
is to compensate shareholders of the underlying stock.
Purchase fees – These fees are the equivalent to Front End Load but
again, are not paid to or charged by the brokerage but to the
shareholders.
Stock Fees
As discussed before, when you buy or sell stock, there is a fee
charged by the brokerage to facilitate the trade. There are no other fees
associated with stock except for the spread, if you are a day trader. With
every stock there is a bid and ask price. The price a buyer is willing to
pay and the price a seller is willing to sell the stock for. The difference
in these two prices is called the Spread. If you buy stock and want to
sell it at a profit. You must consider that you will have two brokerage
fees (the $4.95 to buy and the 4.95 charged to sell). You will look at the
current sell price which could be very different from the price you
bought the stock. Since the market moves continuously, you must
consider whether your gain is large enough to support a drop in the price
while waiting for a sell order to execute. Orders are typically placed
right away but, as in any transaction, you must have a buyer. You must
add these costs up and determine what price you can sell for to get back
these costs plus make a profit. Typically, a good online broker will
show you a calculator as you are inputting the sell order which will
show the current price and your profit (they take the costs into
consideration). Also, luckily there are handy calculators online to help
with stock price so here is an example:

Stock investment companies also give the investor a way to limit

loss by a Limit order which means when you place the sell order, you
can type in a price you must get, so that, if the market falls, the order
does not execute, you keep the stock but you also did not sell for a lower
profit or loss.
Bond Fees
Bonds do not have any extra fees associated with them but they also
do not have an apparent spread. The price is established at the
brokerage and the price that is shown to an investor already includes a
fee for the brokerage. Sometimes, brokerages may have better prices on
some bonds as an incentive for investors to, take a look at bonds, and
ultimately their own portfolio with the hope that the investor will make a
trade (which brings more revenue to the brokerage). This is an
advantage to the investors since they get better pricing.
Bond prices are either above 100 (premium pricing), below 100
(discount pricing) or at 100 or par value. A bond is at par when the
underlying bond is valued as $100,000. To simplify the price, $100,000
is shortened to 100. If the price of a bond is 99, it has been discounted,
and if it is 101 then you are paying a premium or more than it is worth.
Why would you do that? Because bonds pay out interest (called a
coupon) per month or quarterly which is expressed as yield. You will
get this coupon money as long as you hold the investment. If you can
purchase a bond at a discount, hold it to obtain the interest from the
coupon, then it can be a very good long term investment. However,
typically, the returns are not what you would get buying stock. But, as
you get older and want to preserve your money (because you are not
longer in a long term scenario) and you want monthly income then
converting stocks to bonds and living on the interest is a great strategy.
My future ebook on bonds will discuss different investment
strategies, like laddering, to buy bonds at the best prices for long term
income.
Certificates of Deposit
Certificates of Deposit (CD) or Fixed Deposits do not have any fees
to speak of when investing but, you could forfeit the interest you make
on a certificate if you withdraw the money early. Most CD’s are for a
fixed term. If I have a 6 month CD and withdraw the money before the
6 month expiration date, I will most likely forfeit all or most of the
interest that has accrued over the term. So, make sure you have several
CD of smaller amounts with various term lengths so you can access cash
within a 1 month period. There are 1 month, 2 month, 3 month and on
up to 5 year CD’s. I would put money in 1 month to 1 year CD’s but if
your timeline is longer than 1 year, I would consider putting the excess
money in a mutual fund since even back end load mutual funds will
usually expire the fee after 5 years.
Fees are the fastest way to lose money but also the best way to make
your money grow when you are smart and shop around for free or low
cost investments. This is ultimately why I wrote this book, Be The
Bank. I did not like seeing my friends and family paying out fees to
banks, or putting their money in low interest rate savings accounts, with
no way to build for their own future. Even now, I have friends that
refuse to invest in their own futures, by refusing to invest in knowledge.
END OF CHAPTER FIVE ACTION LIST
☐ Check the fees on each of your investment accounts whether at a
bank, or brokerage. Make sure you are familiar with the types of fees
associated with different accounts.
☐ When you purchse new investments whether Mutual Funds, Stocks,
Bonds or others, check the fees associated with the investments.
☐ Avoid trading on platforms that charge a fee. All good investment
companies have their own platforms which investors can use for free for
having a brokerage account with the firm.
Read Chapter 6 – For an overview of investment products found at a
brokerage.
 CHAPTER SIX –Investment Products
Investment products are available for every type of investor;
aggressive grower, moderate grower, income seeker, and money retainer
or for investors wanting to put money in consumer goods (Proctor &
Gamble, Nestle, Coca-cola), technology (Apple, Microsoft), energy
products (Duke Energy, Solar Edge). The differenty types of products
also allow flexibility in how the stocks are bought and sold. This
chapter outlines some of the main things to consider when deciding to
invest in each product. I have listed the products in order of the ease of
investing for beginners to more complicated investments.
Most investment companies have some type of investment screener,
similar to a questionaire, that picks investments based on the criteria you
select. Two of the best Mutual Funds companies are Vanguard and
Charles Schwab. I currently have investments at Schwab and used
Vanguard to build my portfolio during my early days of investing
because they focus on mutual funds, the easiest type of investment.
Both companies have excellent customer service. While Vanguard
focuses on long term retirement focused investors in the USA, Schwab
caters to USA and International customers with more advanced products
and tools for more sophisticated investors, both have low fees.
An investment screener is hyperlinked below and is free to use, even
if you do not have a Schwab account. I have outlined categories that
some investors overlook.
Within an investment screener, there are some items that an investor
should be aware of:
Ratings – Investments are rated by outside entities or the investment
company itself. Two independent rating companies that investors will
see most often are Moody’s and Morningstar. Morningstar gives “star”
ratings on a scale from 1-5 and Moody’s rates based on an alpha-
numeric scale. These give an overall opinion on the worthiness of the
investment. I usually set the ratings high so I get the best results.
Fund Category – as stated above funds can be in many categories.
However, fund screeners have their own categories and for Schwab, the
categories include International (international stocks), Large cap
(companies with large amounts of money), small/mid cap (smaller and
mid-sized companies that could be growing), Specialty Funds (an
example would be an Artificial Intelligence fund, where the stocks are
picked by AI), and Tax-Free Bond funds (which pick bonds only, not
stock, in tax free municipalities).
Fund Characteristics – these can be set to show: index funds only
(funds that hold stocks from across the entire market), Fund Company
(funds only sold at one investment company with their name on the
funds; example, Vanguard Funds would show Vanguard Growth Fund,
and all their other funds), Socially Conscious (funds that are healthy for
society and the earth), Three Year Total Return (shows the average of
the past three years returns) and many more characteristics.
Average Annual Return - Allows the investor to choice the funds
that only have returns in a certain range. For example: I choose 10-15%
and the funds displayed have annual returns between 10-15%.
As you toggle on more criterial in a screener, most screeners will
show the number of funds that will be displayed. For example: If I
choose Annual Return 10-15% and the screener shows 654 funds
available. So, I also choose 16-20% and the screener shows only 15
funds available. I may want to go back to the lower return so I have
more choices.
Below is a screen shot of the screener available at Schwab.

Becoming familiar with the sceener choices and learning, one by

one, the meaning of each selection will increase your knowledge of the
 fund choices. Take time to play around with the funds screener and see
how selecting different choices changes the outcomes.
MUTUAL FUNDS
Mutual funds are bundles or packages of stocks. These can be based on
the type, by goal or by sector. Mutual Funds can also be bundled as an
overall index of the entire stock market. This is why it is important that you
have a clear idea of what your goals and timeline are for your investments.
Most investment websites will, as part of the account set up, ask you to take a
questionnaire which outlines your risk tolerance and your goals. These two
are key in selecting appropriate investments. Once these are know, the
investment company will make suggestions of investments for you. You can
use their suggestions or you can use the screener to look for your own
investments. It is up to you. In my ebook on Mutual Funds, I take an in
depth look at Mutual Fund categories, types, fees, and walk you though a
screener and show how to place an order. Mutual Fund companies can put
restrictions on the minimum amount of a fund you must buy. And, the fees
are different from stock since they can be all paid up front when you
purchase the fund or all paid at the sale of the fund or on a sliding scale
where you initially have a fee if you sell within a few months but if you keep
the fund for longer, usually 5 years, you may have no fee at all. There are
also No Load funds that do not have any fee at all, ever, and you usually have
the option to search for these in the screener. All of this can be taught on an
investment companies website or you can pay a little more and work with
their customer service rep.
ETFs (Exchange Traded Funds)
ETFs are similar to Mutual Funds in that they are a bundle of investments.
However, ETFs are traded exactly like stock with fees exactly like stock.
The only advantage is diversification. Since each ETF is made up of a
basket of companies, the risk is spread over many different stocks. The
screener can be used to choose ETFs similar to mutual funds.

Stock
As stated previously, stock is ownership in a company. When you own
stock, as a shareholder, you may have to vote on company business.
Notification of the vote will be sent to you by the investment company and
you can choose to vote or not. You buy the stock by looking at the price of
the stock that day. The price fluctuates between a Bid price (the price a buyer
is willing to pay) and the Ask price (the price the seller is willing to sell).
Typically, if these two numbers are close together, the stock is rising but as
they get farther apart, the stock is falling. It is usually wise to watch the
market on a stock for a period of time so you can get familiar with the
movement of the particular stock. This amount of time could be a week for a
new investor to an hour or a few minutes to a more savy investor. I usually
screen stock, read reports, look at news, and then watch the prices before
choosing a stock. I do not typically pick a stock in one day but this also
depends on the overall market. If there is a big drop in overall stock prices
one day, including the stock I am looking at, and then it appears the overall
market is recovering, I may drastically shorten my research time so I can buy
the stock low, while it is “on sale”. The number one rule of stock investing is
buy low and sell high. However, stocks do not automatically follow other
stocks so you need to work on looking at the signals quickly so you can make
a determination when the overall market moves.

Don’t listen to others stock recommendations. I have had better

investment picks when using the Yahoo Finance screener and picking
stocks on my own versus listening to Cramer (a TV investment guru) or
other Financial news reporter’s suggestions about stock. Ultimately, this
is your money and your risk tolerance, so, it is best to learn to pick stock
on your own. My suggestion is to invest in mutual funds for the long
term but, in the meantime, continue to teach yourself about picking
stock. Some companies, Schwab included, have play money accounts
where you can use fake money to invest in the market. These platforms
use the real market charts, with the fake money, so you can see how you
would do over a month or two. You learn a lot faster by actually getting
into the market and doing it, but it is a lot easier when you know you are
not going to lose your hard earned money. Because you can, and will,
lose money in the stock market. I am at a point that I make much more
than I lose so that, for the few stocks I have lost money on, I was able to
hold the stocks and let them recover over time. Stock options can be
used to cover the loss (which is something else I do if it is a big loss),
but once the stock solidly turns around, I start buying more as the stock
is gaining and come out ahead. This does not happen often as I now
focus on large cap, old companies that pay dividends. And, I am talking
about individual stock. I have my portfolio diversified so that I have
 stocks, mutual funds, etf’s, bonds and options in my portfolio in many
different categories. Diversification is the second most important key in
stocks. To learn a lot more about stocks; trading stocks, reading reports,
looking at charts (which is lifelong learning), knowing when to sell, and
more, read my ebook on stocks.
Options
Options are less expensive than purchasing stock but should be used as a
hedge against loss instead of an investment strategy. Definitely, not for new
investors. It is not a cheap way to purchase stock and you could lose all of
your money quickly because of the complicated nature of options, so most
beginners should avoid it. In fact, I am mainly going to focus on the
definition of Options here. An option is a contract to buy or sell a stock at a
certain price in the future. To purchase a contract, the buyer pays a fee to the
seller. To sell a contract, the seller gives a fee to the buyer. So the contract is
the right to sell or purchase a contract. As a party to the contract you can be
the seller or the buyer and you can choose any date you want for the contract
to expire. The fee fluctuates depending on the date of expiration and the
movement of the market.
There are many types of contracts, which I will not get into here but, in some
scenarios, you promise to deliver the actual stock, backed by the contract, or
the full purchse price of the real stock. So, if the market goes in a different
direction than you anticipated when you purchased the contract, you could be
left owing a lot of money to the buyer of the contract. Investment companies
often allow you to have a margin account which covers these instances of
default but usually the margin account must be covered by your own cash or
investments. Meaning that by buying an option contract that you though was
only for a few dollars in fees, could leave you with unlimited liability until
the market drop stops, when you have to cash out or sell your own stock to
cover the loss immediately. It is a scary prospect that most option investors
do not realize until they get in over their head. I really have not explained the
options market here and do not plan to write an ebook on options investing
since I do not think it is the best way to make money. It can hedge against
loss of real stock that you already hold in your portfolio, but if you are savy
enough to trade stock on your own, you will be at a point to learn about
options on your own.
FUTURES
Futures are basically trading commodities like currency or precious
metals like gold or platinum. They are not typically for long term
investors unless you have some extra cash that you have designated to
"play with". (Meaning, you are ok to lose a few thousand.) Futures
trading is a lot like predicting the future and requires an investor to keep
on top of trends and news as well as thinking of the big picture of a
commodity. For instance, if I wanted to trade in gold, I have to know
about the overall gold market, consumers sentiment about gold, the
amount of gold on the market, how the stock market is doing, and
various other economic factors.
Futures trading is all about research and statistics so, if you like that and
have heard about cryptocurrencies or other trends, this may be an
investment that you will want to discover and learn about. However, all
investment advisors as a whole suggest no more than 10% of your
overall portfolio worth be put in commodities or futures contracts
(agricultural products like the price of corn, wheat, pigs, are all traded
on the futures market). If you are a farmer, you know that weather can
affect wheat or corn prices, so a drought or flooding could devistate
crops but a good crowing season in the USA with a drought in China
might make prices skyrocket, so it can be a fun and challenging
investment. Futures trade similar to stock so, once you feel like you
have a solid ability in trading stock, you might give the futures markets
a try with a small part of your portfolio. They are riskier than stock.
Afterword
Be The Bank is the first in a series of books to teach people about investing.
There is a lot more to learn. Find me on Author Central on Amazon to see
other books I have published including some low content coloring books and
other journals. Because I have invested over the years, I am able to live my
dream. I hope you make tons of money so you can live yours too!
 About The Author
Suzanne Goodfellow

Suzanne is a teacher, author, entrepreneur, and of course, investor. She

moved to Malaysia after a successful career as an investment banker in the
USA. She worked for banks, mortgage and investment companies until her
mid-40's. She is a self-taught web designer now and supplements her
retirement portfolio with passive income from various online ventures. She
spent two years as a volunteer teacher with Myanmar children learning
English so they could successfully migrate to the USA. She has a Malaysian
husband she adores, 6 pet chickens, and a sweet male cat Cotton. Please visit
her online at Kaymartco.com or Pawschool101.com