stockmarket

A SIMPLE LESSON IN FINANCE: WHY INVESTING INVIGORATES AND DEBT DEVASTATES YOUR FINANCES

Posted on by Joseph M. Brennan Jr.

Here’s a simple lesson in finance for those who might need it: Investing money substantially increases your finances overall while carrying debt does much worse than the opposite. And the difference is astounding.

A simple common expression used to demonstrate how investments grow over time is called “the rule of 72.” The average interest rate expressed as a whole number times the number of years required to double an initial investment equals 72. Let’s take a look at how this simple rule can impact your finances. Let’s start with investing first.

Imagine you invested $10,000 earning 8% interest (8% is a reasonable figure given that the long-term average earned in the stock market has historically been about 7.5% – it has been much higher in recent years but at some point it could revert back to its long-term average). This means, using the rule of 72, that your $10,000 initial investment will become $20,000 in 9 years (8 x 9 = 72), $40,000 in 18 years, $80,000 in 27 years, and $160,000 in 36 years. And that is all from just making a single, one-time, initial investment of $10,000 at the beginning. I want you all to stop and think about that for a moment: Your $10,000 grew to $160,000 by doing nothing else. This is how compound interest works and how you make your money work for you – instead of against you.

Most people will do much better than the above because they will continue adding to their investments over time – and as long as they do not remove money from their investment (a mistake many people make by the way), then the power of compound interest will continue working in their favor.

The above example also illustrates why starting saving and investing at an early age is very important. And if you want to learn how to how to invest well and create a brighter future with minimal effort, please read this: https://brighterdayslifecoaching.com/how-to-invest-well-and-create-a-brighter-future-with-minimal-effort/

Now, let’s take a look at the opposite side of things to see how debt can devastate your finances. Imagine you had the same $10,000 as credit card debt at a 24% interest rate (24% is a little high by today’s standards – credit card rates presently average about 21% – but are higher for people with lower credit scores) but using 24% simplifies calculations and makes it much easier to compare both sides of the story between investing and debt.

Using the above figures mean, using the same rule of 72, that for your $10,000 in initial debt, you will end up paying $20,000 in 3 years (24 x 3 = 72), $40,000 in 6 years, $80,000 in 9 years, $160,000 in 12 years, $320,000 in 15 years, and $640,000 in 18 years if you didn’t make any payments at all (Note: this is not realistic since most people make at least the minimum payments – which largely reflect the payments on interest only – I’m just trying to demonstrate how much more quickly and deeply debt impacts your finances as compared to investing your money). And that is all just from having an initial debt of $10,000. I want you all to stop and give this some serious thought: Your $10,000 of initial debt grew to $640,000 in only 18 years. This is how debt can quickly, deeply, and easily devastate your finances.

Most people would do much worse than the above because they won’t stop at the initial debt – but will continue adding to their debts over time up until reaching their credit limits – which means the power of compound interest continues working against them.

Let’s now compare the two: In 18 years, your $10,000 investment grew to $40,000 but your $10,000 in debt became $640,000 over the same period of time. This illustrates why so many people get so far behind in their finances, and the simple but very important lesson in finance is this: Make your money work for you over the longer term instead of working against you by living with a strong sense of financial discipline – eliminating debt and investing your money instead. I have no objection to people having credit cards and such to help build up their credit scores and such but get into the practice of paying them off every month so you don’t have to pay interest or fees. If you do this and invest in your future, then you will create a brighter future for yourself and others in your life for the years and decades to come. So, do this if you can.

Again, the above isn’t truly accurate on the debt side of things because it reflects the overall impact if you made no payments at all – I have not factored in the fact that when you make the minimum payments on credit card debt, you are usually paying the interest. So, the interest portion of that debt isn’t working against you the way the much larger debt portion is. However, the interest only payments tend to be quite large (and provide no benefit since they typically pay little to nothing down on the debt portion) and, between that and the debt overall, it would still have a devastating effect on your finances as a whole in a short amount of time and would have required a more complicated calculation to get more precise numbers. I’m really just trying to illustrate the basic concepts of investing versus debt using simple calculations so that people can easily understand why debt can be so devastating in a short amount of time and why the power of compound interest works in their favor on the investment side of things. Also, rest assured the credit card companies will cut you off long before you reach such excessive numbers in terms of your debt to them for their own, financial well-being. However, the impact to your finances would be substantial.

You can read more about my finance and investing tips here: https://brighterdayslifecoaching.com/category/financial-planning-management-and-investing-related-posts/

You can learn about my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing: https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/.

And, lastly, you can read about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities

I wish you much finance and investing success for 2024 (and beyond!).

#selfimprovement #selfhelp #selfdevelopment #intention #fulfillment #success #inspiration #happiness #mindfulness #peace #joy #positivethinking #balance #finance #stocks #investing #stockmarket #bonds #bondmarket

A BREAK IN THE CLOUDS: THE RETURN OF LOW-RISK SAFE HAVEN INVESTMENTS VIA THE BOND MARKET

Posted on by Joseph M. Brennan Jr.

For the first time in nearly 3 years, I am starting to return to the “low-risk, safe haven” bond market and bond fund/ETF investments. I wrote about the risks previously in January/February 2021 (TWO BIG INVESTMENT CONCERNS RIGHT NOW: RISING BOND RATES AND RISING INFLATION | BRIGHTER DAYS LIFE COACHING® and STORM CLOUDS ON THE HORIZON: THE BOND MARKETS AND THE “LOW-RISK SAFE HAVEN” FACADE | BRIGHTER DAYS LIFE COACHING®). Since writing those posts nearly three years ago, longer-term bonds and bond funds/ETFs have dropped 46% which is very unusual for the bond market when considering its longer-term history as a low-risk, safe haven investment – these losses are more typical of a stock market decline than a bond market decline. Due to this outsized drop and other factors, longer-term bonds and bond funds/ETFs have now become very attractive in my opinion – and I will continue buying into them on any future weakness.

Some of the reasons I think longer-term bonds and bond funds/ETFs might be a good investment going forward include the following:

1) The high interest rates (and the corresponding low bond prices since interest rates and prices on bonds are inversely related) is likely to make the United States (and other nations) inclined to provide less fiscal support and/or higher taxation in future years due to the higher cost of servicing debt – inflation would be another contributor to this,

2) The hesitancy of the Federal Reserve to provide as much economic support in the future as they have in the past in terms of interest rate reductions and Quantitative Easing (QE) for buying bonds and such,

3) a deteriorating economy and corporate earnings due to the combination of the above two factors which is likely (at some point) to result in substantial stock market declines and corresponding gains in low-risk, safe haven investments such as bonds and bond funds/ETFs. Much of the gains experienced in the stock market tend to be earnings, economy, and policy related.

These are some of things I’m seeing on the horizon right now. Lots of things to ponder and position for – especially since historical, low-risk, safe haven investments seem to be poised to regain their previous luster in the years to come. As such, perhaps one of the better longer-term investment strategies might be to start buying into longer term bonds and bond funds/ETFs.

For perspective, take a look at the 10-year, 20-year, and 30-year treasury yields (prices move in the opposite direction of yields) which had been falling for 40 about years but are now starting to normalize a bit. The last time they went up consistently was during the 1960s and 1970s but are now starting to rise again.

The bottom line is the prices of bonds and bond funds/ETFs are starting to normalize a bit which means substantial gains could be experienced by bond market and bond fund/ETF investors in the years to come. So, it might be wise to start positioning accordingly.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/).

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow!

#finance #stocks #investing #stockmarket #success #bonds #bondmarket

HOW TO LOSE YOUR SHIRT IN THE STOCK MARKET WITHOUT LOSING YOUR SHORTS TOO (PART FOUR)!

Posted on by Joseph M. Brennan Jr.

It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I had a real “knack” back in 2022 for picking losing stocks. However, I refused to let them go and continued buying into them as the buy signals got stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as usual, I generally refuse to sell on “buy” signals and frequently do the opposite. I wrote about this back in March and April and didn’t realize at the time that this would become a multi-part series but that is how things played out. Here it is many months later and I am still fighting the downs and ups and downs of what has been a highly volatile stock market over the past year (most of which have been downs). The fight continues but it appears my latest strategies have worked extremely well.

The strategy I used for much of 2022 involved continuing to buy stocks I owned which dropped substantially. However, later in the year I changed this strategy by trying to find new stocks which appeared to be just as attractive and buying those instead. That allowed me to take losses – when sensible to do so on the losing stocks – without invoking the wash sale rule – plus it didn’t allow certain stocks to dominate the performance of my portfolio as much as they had in the past. You can read about my previous strategies and how they evolved throughout 2022 by seeing part one, part two, and part three of this series.

There’s no question about me having a pretty lousy year in 2022 – it was my first down year in 11 years – but sometimes that will happen as an investor. The low point for me was when I was 142% invested (yes – I was using margin) and down 41.19% for 2022. At the end of 2022 I was 96% invested and down 23.6% for the year. So, things improved as the year progressed.

Is there any guarantee a given strategy will work? Of course not. Investing is primarily about making decisions based on various indicators, the associated likelihoods, and employing strategies accordingly. So, at best you can position yourself for a potential favorable return, but there is never a guarantee.

If I had not evolved my techniques and continued using my previous investment strategies, I would have been down 70% by the end of 2022. So, I’m very thankful that I modified my investment strategies throughout the year. As a point of reference, Kathy Wood’s ARKK stock gained 150% back in 2020 (nearly as much as my 164% gain), lost 23% back in 2021 when I had earned an 8.7% gain, and lost 69% in 2022 when I had lost 23.6%. So, I feel pretty good about ending 2022 with not too bad of a loss relatively speaking.

Things have been very different in 2023 so far and – although I had an entire year of downs and ups and downs throughout 2022 – I have gained 36% this year in just a little over 4 weeks! That’s about a 5-year gain in just over 4 weeks time! So, I’ve recovered all of my losses from last year (and then some). I always tell people that it makes sense to stay invested and to continue buying into downturns – even when things go badly – because when it turns… it turns. And you want to be fully invested to the extent possible when that happens.

I’ve done so well this year that I am now in the mode of “selling every gain.” So, every time my overall portfolio experiences additional gains, I actively look for more stocks to sell. I’m about 50% invested right now so I am finally becoming more of a lower risk investor much to my relief.

I was a high risk investor throughout 2022 (much to my dismay). I moved from being a low risk investor (back in 2021 – which is the level of risk I am supposed to be at given my financial circumstances) to a high risk investor throughout 2022. That was never supposed to happen. However, I am very much relieved that I still have the ability to “fight it out” and survive as a high risk investor. Needless to say, I will be making additional changes to tighten my techniques so that I don’t become as much of a high risk investor in the future.

I’m happy that I had the foresight to continue modifying my investment strategies. It really has paid off. This is something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor (although throughout 2022 I was temporarily high risk) but many of you will probably be higher risk investors. So, your investment strategies will probably need to be a bit more aggressive than mine.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. It’s been an interesting investing experiment I’ve been running so far for 2022-2023. We’ll see how things go in the future.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success

IT’S A GOOD TIME TO BUY FOR LONGER TERM INVESTORS

Posted on by Joseph M. Brennan Jr.

The IWM ETF (which tracks the Russell 2000 index) has dropped about 40% from its previous high. So, it looks like a pretty good time to buy for longer term investors. The IWM (and the Russell 2000 for that matter) might drop even more if we actually experience a recession (this index usually falls first and the hardest during recessions but is generally the first and the fastest to recover).

Regardless of whether we experience a recession or not, the IWM (and Russell 2000) is likely to recover its previous high within 3 years or so. If you’re thinking a 40% gain in 3 years sounds pretty good, then do your math again. Because it would be more like a 67% gain which is very substantial. Even if the IWM took 10 years to get back to even (which would be a very rare occurrence), that would be a 6.7% gain every year which is a pretty decent gain.

If you like technology stocks then the QQQ, which tracks the Nasdaq, has also dropped about 40% from its previous high which means it will also experience about a 67% gain once it gets back to its previous high.

Another thing you can do is split money between IWM and QQQ if that is your preference or buy over several days, weeks, or months. The only problem with that might be when they recover they generally rise sharply so you might miss out on some of the early gains if that happens.

You’re Welcome.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success

HOW TO LOSE YOUR SHIRT IN THE STOCK MARKET WITHOUT LOSING YOUR SHORTS TOO (PART THREE)!

Posted on by Joseph M. Brennan Jr.

It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I’ve had a real “knack” over the past 9 months or so for picking losing stocks. However, I have generally refused to let them go and have continued buying into them as the buy signals get stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as usual, I generally refuse to sell on “buy” signals and frequently do the opposite. I wrote about this back in March and April and didn’t realize at the time that this would become a multi-part series but I suppose that is how things are playing out for this year. Because, here it is months later and I am still fighting the downs and ups and downs of what has been a highly volatile stock market this year (most of which have been downs).

The fight continues but it appears some of the strategies I’m using are actually helping. The new strategy I am employing involves rotating out of the stocks which appear to be less favorable in nature and buying into new stocks which appear to be highly favorable in nature – even when the stocks I’m selling are carrying heavy losses. Now, many people might question such a move and be inclined to just hold the stocks long enough for a gain to be realized. However, the tax loss harvesting strategy I wrote about previously and the fact that I would stand to have an effective “gain” of about 24% based on my current tax bracket by selling these more unfavorable stocks (even if no further gains were realized in my portfolio) combined with the potential for much stronger gains by switching to much more favorable stocks, then the potential gains from here might be pretty substantial.

Is there any guarantee that the above strategy will work? Of course not. Investing is primarily about making decisions based on various indicators, the associated likelihoods, and employing effective strategies accordingly. So, at best you can position yourself for a potential favorable return, but there is never a guarantee.

I’m presently still a high risk investor (much to my dismay), but not nearly as extreme as I was back in March and April. As a result of all the buying I have done, I have moved from being a low risk investor (back in 2021) to a high risk investor. The low point for me so far this year was when I was 142% invested (yes – I was using margin) and down 41.19% for 2022 (and down 44% since September/October 2021). Presently, I am 97% invested and down 30.62% for 2022 (and down 33% since September/October 2021).

I haven’t been overly concerned with having a negative return for 2022 because all of the major stock market indexes are getting hammered this year so far (the recent lows being a 24% loss for the S&P 500 Index, a 34% loss for the NASDAQ, and a 28% loss for the Russell 2000) and even the ultimate, safe haven, low risk investment (the bond market) has gotten hammered with a highly unusual 11% loss. Eventually, the market indexes will recover and so will most of the stocks I’m holding. I would be more concerned if I was experiencing substantial losses while the major market indexes were showing significant gains.

You can read about the buy and sell strategies I’ve been using in Part One and Part Two of this series. I am mostly using the same strategies throughout the rises and falls in stock prices no matter what the cycles might turn out to be. If the stocks are dropping, I’m tending to buy more. And if they are rising, I’m tending to sell more. The only exception is the new strategy I’m currently employing where I am taking realized losses and rotating out of less favorable stocks and buying into more favorable ones.

I’m happy I’ve been modifying my investment strategies. It seems to be paying off. This is something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor (although right now I am temporarily high risk) but many of you will probably be higher risk investors. So, your investment strategies will probably be a bit more aggressive than mine.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. It’s been an interesting investing experiment I’ve been running so far for 2022. We’ll see how things go.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success

HOW TO LOSE YOUR SHIRT IN THE STOCK MARKET WITHOUT LOSING YOUR SHORTS TOO (PART TWO)!

Posted on by Joseph M. Brennan Jr.

It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I’ve had a real “knack” over the past 7 months or so for picking losing stocks. However, I refuse to let them go. And I continue buying into them because the buy signals keep getting stronger and stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as usual, I refuse to sell on “buy” signals and frequently do the opposite. I wrote about this back in March and didn’t realize at the time that this would become a multi-part series but I suppose that is how things are playing out. Because, here it is a month and a half later and I am still fighting the downs and ups and downs of what has been a highly volatile stock market this year (most of which have been downs).

The fight continues but it appears some of the strategies I’m using are actually helping. I’m still presently a high risk investor (much to my dismay), but not nearly as extreme as I was back in March. As a result of all the buying I have done, I moved from being a low risk investor to a high risk investor. The low point for me so far this year was 14 March when I was 140% invested (yes – I was using margin) and down 30.34% for 2022 (and down 34% since September/October 2021). Presently, I am 92% invested and down 20.65% for 2022 (and down 24% since September/October 2021). Although, the present 21% loss I am experiencing is substantial, it comes as each of the major indexes have either retested (in the case of the S&P 500 and the NASDAQ) or closed below their March lows (in the case of the Russell 2000 index). The last time the major indexes experienced these lows (back in March) my losses were far greater than they are right now. So, things are improving and moving in a positive direction.

I haven’t been overly concerned with having a negative return for 2022 because all of the major stock market indexes are getting hammered this year so far (the recent lows being a 13% loss for the S&P 500 Index, a 20% loss for the NASDAQ, and a 16% loss for the Russell 2000) and even the ultimate, safe haven, low risk investment (the bond market) has gotten hammered with a highly unusual 8% loss. Eventually, the market indexes will recover and so will most of the stocks I’m holding. I would be more concerned if I was experiencing substantial losses while the major market indexes were showing significant gains.

You can read about the buy and sell strategies I’ve been using in Part One of this series. I am using the same strategies throughout the rises and falls in stock prices no matter what the cycles might turn out to be. If the stocks are dropping, I’m buying more. And if they are rising, I’m selling more. I continue the process until I get to the point where I am either “all in” (including margin – at least for now) or exit the positions completely.

I’m happy I’ve been modifying my investment strategies. It really seems to be paying off. This is something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor (although right now I am temporarily high risk) but many of you will probably be higher risk investors. So, your investment strategies will probably be a bit more aggressive than mine.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. It’s been an interesting investing experiment I’ve been running so far for 2022. We’ll see how things go.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success

HOW TO LOSE YOUR SHIRT IN THE STOCK MARKET WITHOUT LOSING YOUR SHORTS TOO (PART ONE)!

Posted on by Joseph M. Brennan Jr.

It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I’ve had a real “knack” over the past 6 months for picking losing stocks. However, I refuse to let them go. And I continue buying into them because the buy signals keep getting stronger and stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as is usual, I refuse to sell on “buy” signals and frequently do the opposite.

As a result of all the buying I have done, I moved from being a low risk investor to an extremely high risk investor. This can happen from time-to-time and as long as I don’t remain a high risk investor for a long period of time, then that’s probably okay. I haven’t been too concerned because I’ve liked the patient approach I’d been using. And, frequently, losing stocks become leading stocks over time and stocks that continually get clobbered usually experience very strong reversals. So, I keep buying into them.

The low point for me so far this year was Monday (4 days ago – 14 March). I was 140% invested (yes – I was using margin) and down 30.34% for 2022 (and down 34% since September/October 2021). Ordinarily, as a low-risk investor I would rarely be anywhere close to 100% invested in the stock market (much less over-invested). But I was not willing to go down without a fight. And so far it has paid off handsomely. As of today, I am down 9.31% for the year and am 106% invested. So, that’s a huge, 21 percentage point gain in only 4 days. So, I’m very happy about this relatively speaking. It feels like victory even if it’s truly not in terms of me not earning any positive returns so far in 2022.

I haven’t been overly concerned with having a negative return for 2022 because all of the major stock market indexes are getting hammered this year so far (the recent lows being a 13% loss for the S&P 500 Index, a 20% loss for the NASDAQ, and a 14% loss for the Russell 2000). And eventually the market indexes will recover and so will most of the stocks I’m holding. I would be more concerned if I was experiencing substantial losses while the major market indexes were showing significant gains.

Now, a couple of years ago, I would have been “all in” several months ago and have been two or three times more negative using the strategies I had detailed in my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books (https://brighterdayslifecoaching.com/published-books…/). And these might still be very good strategies to use for higher risk investors. But for low risk investors, they may not be. So, I’m very thankful that I modified my approaches quite a bit since then so that I have a chance to experience shallower losses (relatively speaking) and recover from these.

The approach I’m presently using to buy into falling stocks is the following:

  1. If the initial position of a stock I bought drops 10%, and the stock still looks attractive based on the indicators I use to make investment decisions, then I buy 10% more shares than I did the first time (e.g., if I bought 100 shares the first time, then the second time I buy 110 shares: 1.10 x 100 = 110).
  2. If the stock drops another 10%, and the stock still looks attractive based on the indicators I use to make investment decisions, then I buy 10% more shares than I did the second time (e.g., 121 shares: 1.10 x 110 = 121).
  3. I continue this process with every drop.

The approach I am presently using to sell the gains is the following:

  1. I determine what a reasonable gain might be for the stock from the current depressed levels it is trading at (20%? 25%?). If the stock gains that amount from the lowest price I paid, then I sell that set of shares (e.g., if the stock rebounds strongly after the second buy of 121 shares in the above example, then I will go ahead and sell the 121 shares if the gain is substantial enough).
  2. I determine what a reasonable gain might be for the stock from the current level it is trading at after selling the first lot of shares (10%? 15%?). If the stock gains that amount from the most recent sell price, then I sell that next set of shares (e.g., if the stock gains the amount I’m targeting beyond the price I sold the 121 shares for in the above example, then I will go ahead and sell the 100 shares I bought the first time).

So, I am currently using the above process throughout the rises and falls in the stock price no matter what the cycles might turn out to be. If the stock is dropping, I’m buying more. And if it is rising, I’m selling more. I continue the process until I get to the point where I am either “all in” (including margin – at least for now) or exit the position completely.

The above strategy has really worked out well so far. Using my previous strategy, I would have been a much more aggressive buyer on the drops which would have led to much deeper losses and a much longer recovery time.

I’m happy that I modified my investment strategy back in September/October 2021. And this something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor (although right now I am temporarily high risk) but many of you will probably be higher risk investors. So, your investment strategies will probably be a bit more aggressive than mine.

Another thing I am doing in 2022 to maximize my investment returns is performing tax loss harvesting strategies to offset my realized gains and minimize my tax burden. This essentially, involves selling some of your losses to offset your gains. You can read all about my tax loss harvesting strategies here: https://brighterdayslifecoaching.com/maximize-stock-market-returns-by-performing-tax-loss-harvesting-to-minimize-tax-burden/

To the extent possible, what I plan to do in 2022 to maximize my investment returns will be to hold off on selling until the individual lots of the stocks I purchased passes the one year mark. I rarely do this because I tend to take substantial gains as they happen (and I might continue this practice if the gains are compelling enough). However, if I am successful in waiting a year before selling gains, then I’ll only have to pay 15% taxes on those gains instead of my typical 24% tax bracket. So, the tax incentive is huge for waiting on selling your gains if you have that kind of patience. Often, I don’t. But we’ll see what happens. I know I’ll have to do some additional selling soon since I’m presently 106% invested which is much too high for a low risk investor. But I’ll probably get there eventually.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. It’s been an interesting investing experiment I’ve been running so far for 2022. We’ll see how things go.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success #taxes

HOW TO MAXIMIZE INVESTMENT RETURNS EVEN WHEN EXPERIENCING SEVERE LOSSES

Posted on by Joseph M. Brennan Jr.

It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I’ve had a real “knack” over the past couple of months for picking losing stocks. However, I refused to let them go. And I continued buying into them because the buy signals kept getting stronger and stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as is usual, I refuse to sell on “buy” signals and frequently do the opposite.

As a result of all the buying I did, I moved from being a low risk investor to a higher risk investor. That can happen from time-to-time and as long as I don’t remain a higher risk investor for a lengthy period of time, then that’s probably okay. I haven’t been too concerned because I’ve liked the patient approach I’d been using. And, frequently, losing stocks become leading stocks over time and stocks that continually get clobbered usually experience a very strong reversal. So, I kept buying into them.

A couple of years ago, I would have been “all in” several weeks ago and have been deeply negative for the year using the strategies I had detailed in my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books (https://brighterdayslifecoaching.com/published-books…/). And these might still be very good strategies to use for higher risk investors. But for low risk investors, they may not be. So, I’m very thankful that I modified my approaches quite a bit since then and ended the year strongly positive.

The approach I’m presently using to buy into falling stocks is the following:

  1. If the initial position of a stock I bought drops 10%, and the stock still looks attractive based on the indicators I use to make investment decisions, then I buy 10% more shares than I did the first time (e.g., if I bought 100 shares the first time, then the second time I buy 110 shares: 1.10 x 100 = 110).
  2. If the stock drops another 10%, and the stock still looks attractive based on the indicators I use to make investment decisions, then I buy 10% more shares than I did the second time (e.g., 121 shares: 1.10 x 110 = 121).
  3. I continue this process with every drop.

The approach I am presently using to sell the gains is the following:

  1. I determine what a reasonable gain might be for the stock from the current depressed levels it is trading at (20%? 25%?). If the stock gains that amount from the lowest price I paid, then I sell that set of shares (e.g., if the stock rebounds strongly after the second buy of 121 shares in the above example, then I will go ahead and sell the 121 shares if the gain is substantial enough).
  2. I determine what a reasonable gain might be for the stock from the current level it is trading at after selling the first lot of shares (10%? 15%?). If the stock gains that amount from the most recent sell price, then I sell that next set of shares (e.g., if the stock gains the amount I’m targeting beyond the price I sold the 121 shares for in the above example, then I will go ahead and sell the 100 shares I bought the first time).

So, I am currently using the above process throughout the rises and falls in the stock price no matter what the cycles might turn out to be. If the stock is dropping, I’m buying more. And if it is rising, I’m selling more. I continue the process until I get to the point where I am either “all in” or exit the position completely.

The above strategy really worked out well during the slump I experienced towards the end of 2021. Using my previous strategy, I would have been a much more aggressive buyer on the drops which would have led to deep losses and a much longer recovery time. Back in early October, I had a 13% gain in the stock market which is an excellent gain for a low risk investor seeking to beat inflation (inflation was about 5% at that point in time). By early-to-mid December my gains had dropped to 1.5% for the year which was a pretty substantial drop – especially since it was only over a period of a few weeks. Fortunately, I was able to recover much of these losses by the end of the year with an 8.7% gain which still substantially beat inflation (inflation was 6.8% for the year). Much of the losses were probably due to investors selling losing stocks for tax loss harvesting purposes. As such, many of the stocks I’m presently holding are likely to start rising again in the new year. So, I should be positioned pretty well for at least the early weeks or months of 2022. You can read more about the above and all of my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I’m happy that I modified my investment strategy back in September/October. And this something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor but many of you will probably be higher risk investors. So, your investment strategies will probably be a bit more aggressive than mine.

Another thing I did in 2021 to maximize my investment returns was to perform tax loss harvesting strategies to minimize my tax burden. This essentially, involves selling some of your losses to offset your gains. This really helped me because about $7000 of my investment gains in 2021 put me into the 32% tax bracket. So, offsetting this effectively represented a 32% gain on those assets. You can read all about my tax loss harvesting strategies here: https://brighterdayslifecoaching.com/maximize-stock-market-returns-by-performing-tax-loss-harvesting-to-minimize-tax-burden/

The last thing I did in 2021 to maximize my investment returns was to avoid selling any additional gains once I came to the realization that I was in the 32% income tax bracket. So, I decided to delay any selling decisions on gains until 2022 so that I could avoid paying 32% taxes on these gains. It’s always a good idea to track all of your income and stock market gains for the year so that you’ll know whether you are entering a higher tax bracket than usual. Because, if you do, you might be able to make some adjustments prior to the end of the year to minimize your tax burden and maximize your investment returns.

What I plan to do in 2022 to maximize my investment returns will be to hold off on selling until the individual lots of the stocks I purchased passes the one year mark. I rarely do this because I tend to take substantial gains as they happen (and I might continue this practice if the gains are compelling enough). However, if I am successful in waiting a year before selling gains, then I’ll only have to pay 15% taxes on those gains instead of my typical 24% (or in the case of 2021 32%). So, the tax incentive is huge for waiting on selling your gains if you have that kind of patience. Often, I don’t. But we’ll see what happens. I know I’ll have to do some selling towards the beginning of the year since I’m presently 85% invested which is a bit too high for a low risk investor.

AN INTERESTING TWIST ON EXECUTION:

I wrote the above post over the past week and decided to leave it as such since it potentially offered an educational benefit to my readers. In actuality, however, things did not happen as expected so I am going to write about that now to provide additional educational benefit to my readers.

I had planned to execute as stated above, but always make a point to check my math prior to executing. And just as I was about to sell some of my losses, I realized that I had forgotten to subtract my standard deduction of $12,550. Once I factored that in I realized I was actually several thousand dollars below the 32% income tax bracket threshold. So, to take advantage of that new realization, instead of selling some of my losses, I elected to sell more of my gains.

I can’t tell you how many times I have executed plans by mistake due to calculation errors, faulty data, and misinformation. So, always get into the practice of checking your math, confirming your data, and checking your facts before executing your plans. Otherwise, you may not realize the benefits you are anticipating and, in fact, might make things worse.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. And tax loss harvesting can be an effective strategy to use.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success#taxes

MAXIMIZE STOCK MARKET RETURNS BY PERFORMING TAX LOSS HARVESTING TO MINIMIZE TAX BURDEN

Posted on by Joseph M. Brennan Jr.

One way to maximize your returns in the stock market is to perform tax loss harvesting strategies to minimize your tax burden. Essentially, this involves selling some of your losses to offset your gains.

Typically, I fall into the 24% income tax rate category. However, due to my capital gains to date in 2021, about $6000 of my income would fall into the 32% income tax rate category. As such, it makes sense for me to look for stocks that I haven’t sold yet to see if there are any losses I can use to offset this. If I can successfully do this, then this would effectively represent a 32% gain on those assets which would be advantageous for me.

If you are the type of investor who, like me, typically adds to positions over time when they drop in price, then you will want to ensure your standard taxable investment accounts are set up to track your cost basis using “First In First Out” (this is usually the default setting). If you are more of a momentum type investor who typically adds to positions over time when they increase in price, then you will want to ensure your taxable investment accounts are set up to track your cost basis using “Last In First Out.” Note: The tax loss harvesting strategy does not apply to taxable accounts such as traditional IRAs, 401Ks, and such since they are always taxed based on your income bracket at the time any funds are withdrawn. So, this strategy can only be used for taxable investment accounts outside of traditional IRAs, 401Ks, etc.

To effectively use the tax loss harvesting strategy, you must be sure not to invoke the “wash sale” rule which occurs when a security is sold for a loss and, within 30 days before or after this sale, a “substantially identical” stock or security is bought. The reason you want to steer clear of this is because a “wash sale” will provide no tax benefit until after the point in which you exit your position entirely.

Many investment brokers track each of the lots you buy and sell for each of the stock positions you hold. This can be a very handy tool for considering which financial assets to sell to gain the benefits of tax loss harvesting. For example, Fidelity (which is the online broker I use) tracks each of the lots I buy and sell (see Figure 1 below for an example).

Figure 1: Stock Lots Bought and Sold

The first thing to check to ensure you don’t invoke the “wash sale” rule is the most recent date you purchased shares. As you can see in Figure 1, 11/22/2021 was the last time I purchased shares of stock XYZ (and if you have multiple accounts you need to check them all since the “wash sale” rule applies across investment accounts whether taxable accounts or not including Roth accounts). So, to ensure that I don’t invoke the “wash sale” rule I need to wait until 30 days have passed before selling the stock. So, to be safe, I will need to wait until 12/23/2021 before selling this stock.

Since I am trying to offset about $6000 of the gains I’ve had over the past year which would fall into the 32% income tax bracket, I would sell about 400 shares of stock XYZ if Figure 1 represents my losses at that time. Because, my taxable investment account is set up to track my cost basis using the default of “First In First Out” I would start from the bottom of Figure 1 and work my way up from there to reflect what losses I could use to offset my gains. So, starting from the bottom and going up if I sold 400 shares (160+140+100) at that time, then I would have $6092.45 ($5020.74+$625.21+$446.50) of capital losses I could use to offset my capital gains. And if I wanted to be much more precise about the $6000 figure, I could sell a couple of shares less. The other nice thing I can do with this strategy is wait to sell those lots in Figure 1 that I have gains on until after a year has passed. Because then instead of paying 24% tax on those gains, I’ll only have to pay 15%. So, this strategy can allow you to both earn a substantial “return” on your losses and and minimize the taxes on your actual gains.

Now, if you accidentally had your investment account set-up to track cost basis using “Last In First Out” then you would probably have to sell all of your shares to realize the tax benefit you’re seeking. However, the tax loss offset would be much less since you would first be selling all of the shares that had gains or were less negative in nature. So, it’s important to make sure you set up your taxable investment accounts to track cost basis using “First In First Out” unless you tend to be more of a momentum type investor.

For people who do tend to be momentum type investors who typically add to positions over time when they increase in price and have their taxable investment accounts set up to track cost basis using “Last In First Out,” then you would start from the top and move down since the newest shares would be sold first. And you would try to hold your gains until after a year has passed so that you’ll only have to pay long term capital gains taxes (typically 15% or 20% depending on your income tax bracket) instead of the short term capital gains taxes associated with your income tax bracket.

So, the above pretty much sums up how to maximize your investment returns by using tax loss harvesting strategies to minimize your tax burden. The last thing you will want to do, however, is to ensure the “wash sale” rule is not invoked going forward by refraining from buying the same stock(s) within 30 days after selling it for a loss. If you do, then the “wash sale” will be invoked again and you will have realized no tax benefit from selling your losses. So, always be mindful of this.

By using the above strategy, I will avoid having to pay about $1920 on my tax return for 2021 (0.32*$6000 =$1920). So, using this strategy can really help.

You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. And tax loss harvesting can be an effective strategy to use.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success#taxes

EARN ABOVE AVERAGE GAINS EVEN AS A LOW RISK INVESTOR

Posted on by Joseph M. Brennan Jr.

Some people have been asking why I’ve been doing so much selling in the stock market lately when there is a strong potential for more gains to come. The reason is I’m taking a lower risk approach this year so as to build on, but not jeopardize, the record gains I had last year (a 164% gain!).

Right now my overall portfolio has earned a little over 9% in only 5 months. And although this lags some of the other major market indexes right now, my goal for the entire year was primarily my end-of-2021 projection for inflation (2.5%). My stretch goal for the entire year was two times that projection (5%). So, I have exceeded both of these by a large margin in just 5 months. So, I certainly don’t want to risk those gains.

As a low risk investor, I am primarily targeting earning at least the realized headline inflation by the end of the year (the Federal Reserve targets core inflation which strips out food and energy but I don’t think that is very realistic – so, I use the headline inflation number as my end-of-year target). Thus, the realized headline inflation would have to end the year above 9% for me to miss my expected target based on the 9%+ I’ve earned to date. And I don’t see that happening.

A secondary target I like to use as a low risk investor is the end-of-year gain of the S&P 500 (SPX) divided by 5. So, if the SPX earns 30% for the year, I would expect to earn about 6%. Likewise, if the SPX loses 30% for the year, I would expect to lose about 6%. Thus, the SPX would have to end the year above 45% for me to miss my expected target based on the 9%+ I’ve earned to date. And I also don’t see that happening.

As of yesterday:

1) the realized headline inflation was 3.5%.

2) the S&P 500 has gained 10.6% this year so far. So, at this point in the year, I would expect a gain of about 2.1%.

So, I have far exceeded both my primary and secondary targets above which means looking for stocks to sell probably makes a lot of sense for me right now.

Since I have far exceeded my annual targets for this year, I am employing a new strategy which involves selling every gain – even if that involves selling partial shares of stocks I own (i.e ., just those shares which have earned gains – those which haven’t I generally continue holding). The only exceptions to this are stocks I think still have potential over the long term given the increased probability of inflation, overheating of the economy, and interest rate increases (e.g., energy, utilities, gold, shorting of bond market, etc.). The reason for this is that investors are not going to wait for the Fed to decide whether or not they want to start addressing these issues (they’ve called much of this transitory meaning they believe these effects will fade over time). Investors are likely to start aggressively positioning themselves as soon as the economic data and other indicators signal these kinds of pressures.   

Hopefully the above helps to give you some insight into how I am performing my investments this year. Most people need to take much higher risk than me so you probably wouldn’t want to use the approach I’m using. But some might.

You’ll be a very successful investor if you observe and learn from what happens and make adjustments to your investing strategies accordingly over time. So, investing strategies can change from time to time. And they should. Especially, when your risk category changes.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/).

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.

Happy investing everyone!

#finance #stocks #investing #stockmarket #success