Tuesday, October 23, 2012

Why Invest in the Stock Market?

If you are new to investing, the stock market can seem like a confusing and intimidating place to put your money. At a first glance, it might seem to make sense to avoid this havoc and just put your money in the safety of a bank account or government bonds. However, if you aren’t investing in the stock market, you are missing out on one of the most lucrative places to put your money. Here are some of the top reasons why you should consider putting some of your money into the stock market.

High Returns
Stocks are risky assets. This means that they don’t guarantee a rate of return and can even lose money any given year. However, while stocks sometimes lose money, their long-term performance is undeniably positive. Over the past 50 years, the stock market has earned an average return of 10% per year, according to the Federal Reserve. Over this same time period, a guaranteed investment like government bonds only returned 5% per year, barely enough to keep up with inflation. If you are going to grow your savings to reach your financial goals, you need to invest in a high return asset like stocks.

Lower Taxes
Taxes are a major drag on your investment return. When your investments earn income, like interest payments from bonds or rental income from investment properties, you need to report this money as taxable income right away. This raises your tax bill for the year and leaves you with less money for investing.  Stocks, on the other hand, can delay the taxes on your gains. If a stock price goes up, your total portfolio becomes more valuable. However, you don’t need to report that growth as income until you eventually sell the stock. This can push off your tax bill for years.

In addition, when you sell a stock for a gain, it is taxed as a capital gain and not as income. As long as you owned your stock for at least one year, the gain is considered a long-term gain. The current long-term gain tax rate in the United States is 15%. The income earned from your other investments is taxed at your personal income tax rate. By investing in stocks, you pay a lower tax rate on your gains.

Liquid Investments
Stocks are also liquid investments. This means that they are quick and easy to turn into cash. If you need some extra money, you can sell off some stock right away. You’ll only need to pay a small brokerage fee and you’ll get your money within a few days. Other investments are not nearly as liquid. If you invested your savings into rental properties instead, your money is locked up. Converting these assets into cash is a long and expensive process. When your money is in the stock market, you won’t have this problem.

The stock market isn't perfect. Many greedy and irresponsible investors have lost money in stocks. However, if you learn how to be a disciplined, smart, and responsible investor, you’ll be able to make the most out of the stock market’s many advantages.

About the Guest Author
Patrik Fonce is a writer and works currently at QuantShare Trading Software.

Thursday, October 11, 2012

Don't Make These 7 Credit Card Mistakes

While credit cards get a bad reputation on the Internet, they actually can do you a lot of good if you know how to use them properly. Since there’s a rather good chance that you have some sort of credit card in your wallet, you will want to make sure that you avoid these seven mistakes that can cost you a lot in the long haul:

#1 Paying Bills Late
One of the biggest problems you can encounter when paying your bills off can include paying your bills off late. Aside from the late fees that credit card companies charge you, these companies can also jack up your interest rate and let’s not forget that it’s going to hurt your credit score. For example, let’s take one of Chase’s popular cards, the Sapphire Card. In the fine print, it notes that if you miss one late payment, your interest rate can go from a low 9.99% to a whopping 29.99%! Experts note that late fees are often 40% of your FICO score.

#2 Transferring Balances
Transferring your debt from one card to another may sound like a good idea but what you have to understand is that most, if not all credit card companies are going to charge a transfer fee. Generally, this fee is going to be around 3% to 5%. So if you’re going to transfer your $5,000 balance, plan on pending at least $150 in fees. The key here is to make sure that you understand your balance transfer rules and always make sure that you do your math to see if it makes financial sense.

#3 Minimum Payments Kill You
As a rule of thumb that you have heard – if you can’t afford to pay your card off in full at the end of the month, don’t use your card! Well sadly, some people just don’t follow that tip. If you’re finding that your credit card balance is getting out of control, you may be making the minimum payments. Yes, while this is better than paying nothing, you have to realize that by doing so, your credit card balance is going to linger for a long time. For example, let’s say that you have a balance of $5,000 with an interest rate around 14%. If you just paid $100 a month, it would take you over 20 years to pay it off! So the next time you consider paying the minimum, consider throwing a few more dollars toward it.

#4 Not Looking at Statements
Believe it or not but many people just throw their statements away after they pay. What many don’t realize is that mistakes can happen on the statement. Things such as unnecessary fees, fraud and jacked up interest rates can kill you in the long run. Always make it a habit to check your statement to make sure that everything makes sense because you never know what may be on it.

#5 Taking Cash Advances
Yes, there are going to be times when you need cash now. While it may be tempting to plop your credit card in the ATM, you have to realize that cash advance fees can really come around to haunt you. On average, some credit card companies can tack on a minimum advance fee and a high interest rate. For example, a popular Citibank card will take on a $50 fee and 25% APR if you take out $1,000! As you can see, that can add up fairly fast. The longer you take to pay it back, the quicker the interest is going to hit you.

#6 Using Rewards the Wrong Way
Yes, many credit cards on the market do offer some great rewards, but sadly, some people don’t know how to use them properly. What you have to realize is that if you’re not paying your card off in full each month, you’re not taking advantage of rewards, and let me explain why. See, the interest you’re going to have to pay will usually outweigh your rewards nine times out of 10. In general, when using your rewards, just make sure you’re using them the right way.

#7 The Annual Fees
As our last tip, the last thing that you’re going to want to look at is the annual fees. While there are fantastic cards out there that have annual fees, you have to ask yourself if it’s worth it. For instance, let’s say that you spend $100 on the card for the year but it has an annual fee of $75. Is that worth it to you? It’s probably not! So with that being said, make sure that the rewards far outweigh the annual fee if you’re paying one.

About the Guest Author
This post was provided by Hannah Munson. She helps run Howmuchisit.org. If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.

Monday, October 1, 2012

Citi Dividend Card Q4 2012 Categories

I had written before that I have a Citibank Dividend MasterCard. One of the benefits of this card is that it offers 5% cash back on rotating categories of merchants. The main problem I have with this arrangement is that I always forget which categories are currently offering 5% cash back when I am at the store. As a result, I often miss out on the bonus dividend dollars. In order to help me remember, I have decided to post the categories which change every three months here.

For Q4 2012, you will earn 5% for purchases from:

  • Macy's
  • Electronics Stores
  • Toy Stores
Note that "Q4 2012" means from October 1 - December 31, 2012. Also note that even if you have a Citi Dividend Card, the enrollment is not automatic. You have to login and sign up for this offer at the Citibank website.