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MARGIN

Definition

Margin is when brokers (Charles Schwab, TD Ameritrade, etc.) lend money to investors to make trades (think of credit) so they can leverage their assets to make more money.

Why It's Important

Investor beware!  Although using a margin account has the ability to make you more money, it is very risky.  If you are trading on margin and the investments drop, you still owe that money to the brokerage.  In addition, brokers can initiate a "margin call" where they demand some, if not all, of the money they lent to you right then and there.  They can immediately sell your assets for the debt.  It is best to just use a cash account especially if you are a new investor. 

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DIVIDEND YIELD

Definition

The dividend yield represents the ratio between the stock price paid and the dividend paid. A stock trading at $100 per share, with a dividend that amounts to $5 per year, you would divide the $5 by $100 and turn it into a percentage. In this case, the yield would be 5%.


Why It's Important

You will typically find the dividend yield for a stock when trying to research whether it is a good investment.  Remember, not all stocks pay dividends!  The example below is from Yahoo Finance.  The current dividend yield for GE is 0.50%.  This is extremely low as GE has been having a tough year.  In order for companies to pay dividends, they have to be doing well enough to distribute extra funds.  Always look at the financial statements before you dive into an investment. (Remember, the higher the dividend the better but the statements must also show positive signs) 

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ARBITRAGE

Definition

Arbitrage is the simultaneous purchase and sell of an asset to profit from the imbalance in price.  Using this strategy, takes advantage of price inefficiencies in the market.

Why It's Important

Arbitrage opportunities provide a way to collect high returns with little to no cost to you.  This is how it works:

Let's say a stock is trading on the NYSE (New York Stock Exchange) for $50 a share.  Simultaneously, the same exact stock is trading on the SSE (Shanghai Stock Exchange) at $50.30 per share.  An arbitrage opportunity exists because you can buy on NYSE and turn around and sell on SSE making a profit of $0.30 a share.   

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You buy a big name stock (like Apple, Alphabet, or Amazon).  In order to create an arbitrage opportunity, you short the S&P 500 Index (SPY).  This way if the stock gains, you win but also if the stock goes down you win.  Big name stocks weigh very heavily on the market and if the stock goes down the...

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THE POWER OF BUDGETING

Uncategorized Sep 30, 2018

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If you have been keeping up with my finance blog, you know I love to budget! It gives you a sense of control when it comes to your money. I believe in doing a zero-based budget. This means your income will always equal your expenses. With this type of budgeting, you are telling your money where to go every month. I want to give you a recent example of how budgeting frees you instead of constricts you.

I have a line item on my budget for clothing. If you know me, you know I rarely use it. I am always wearing things out until I have to give it up. This month I had a coupon for DSW, and I was like I really do need some new shoes. Me being that cheap person that I am, I didn't want to buy any because I hate spending money! Then it dawned on me, Tiffany you budget for clothing every month, use it! So, I was able to buy new shoes, guilt-free. It didn't slow down my debt payoff or put me in the position to sacrifice something else. It was already in my budget! I wanted to tell...

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ANOTHER SETBACK!

Uncategorized Sep 27, 2018

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A couple of weeks ago, I came outside to yet another flat tire.  What the heck?!  It seemed like every week a tire was going flat on my car.  I knew when I bought the car I would have to get new tires (that was one aspect I used to negotiate the price down), but I didn't think it would be this soon.  I made my seemingly weekly trip to the gas station to fill up again, and I was on my way.  Of course, that wasn't the end of it... 

After a few hours, I'm ready to leave my location and go to a lunch meeting with a friend.  I get in my car to pull out, and I noticed my car wobbling and noise coming from the tire.  I pull back in and get out to inspect.  Low and behold, the tire is completely flat!  So, now I'm stranded.  Of course, I got rid of AAA a few years ago as I deemed it a waste of money for my situation.  Now, I needed it!  My brain started twirling trying to think of how I was going to get anywhere forget the...

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SELLING SHORT

Definition

Selling short aka short selling is when an investor thinks a stock will go down so they "short it". Essentially, the investor borrows shares of stock or another asset he or she doesn't own, sells it, pockets the money with the promise to replace the property someday, and hopes the asset declines in price so it can be repurchased at a lower cost, the differential becoming the profit.  They make money on a dip!

Why It's Important

During the financial crisis of 2008, short sellers were making money in the market while everyone else was losing.  A great movie that details what happened is "The Big Short".  Be careful when short selling because if it's not done right, it could bankrupt you!  Keep in mind that you are borrowing shares so if the stock goes up you will be in debt to the broker you borrowed from.

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MY FIRST PODCAST : GUEST APPEARANCE

Uncategorized Sep 20, 2018

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I am so excited! I was able to get my feet wet with podcasting by being featured on a fellow bloggers podcast.  It was so fun to get interviewed and we had a really great conversation about timeshares and home-ownership.  Take a listen:

For all episode notes and to subscribe, check out Danielle's site at https://podcast.thoughtcard.com/episode-4/

As a side note: We used the Longhorn Steakhouse gift card mentioned in the interview a few days ago for a date night.  Yummm!!

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ASSET ALLOCATION

Definition

Asset Allocation is an approach to managing your investments that involves setting parameters for different asset classes (bonds, real estate, cash, stocks, etc.)  It involves setting a percentage of each kind to hold in order to reach your investment goals.

Why It's Important

Planning your asset allocations is a lot like budgeting.  There are a multitude of different resources available to see what your target asset allocations should be based on your age, income, and retirement age when planning for retirement.  Generally, the younger you are, more of your portfolio should be invested in stocks.  As you get older you would start transitioning your portfolio to more bonds as they are a less volatile investment.  This video may help you to develop a strategy for yourself.

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REITS

Definition

REITs are Real Estate Investment Trusts.  They allow you to invest in different types of real estate.  REITs are available on the market for any real estate niche whether you want to invest in hotels, apartments, commercial buildings, etc.

Why It's Important

Most people think the only way to invest in real estate is to buy a house or rental property.  REITs are traded on the stock exchange (just like stocks and bonds) to take advantage of the volume of people coming together to invest in bigger projects.  They offer another form of diversification in your portfolio.

Be sure to invest in liquid REITs sold on the exchange and not illiquid REITs that are hard to get rid of!

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BUYER BEWARE : FAST FOOD REVIEWS

Uncategorized Sep 09, 2018

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An odd thing happened Friday, I went to the ATM to withdraw money, and I received the message that said, "Unauthorized Use." I thought maybe I put in the wrong pin, so I swiped and tried again. I received the same prompt! What could be going on?! 

 

I took the next logical step and called the card company. They explained that my card had a block on it and they were sending me a new card because my information was compromised at a Sonic restaurant. Huh? In my head, I realize it has been a while since I've even been to a restaurant. On Saturday, I received another letter from another bank card saying that I was going to be reissued a new card.  Wow! The situation was unusual because my friend had just told me earlier that week how her card was compromised at a Bojangles restaurant. What is going on with the fast food restaurants?! So, I wanted to make a post with some tips and what to look for so you won't become a victim.

  1. Use Cash Whenever Possible - This is the...
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