Author: Mr. Honu

Categories
Stock Market Investing

Real estate investment trusts or REITs

Real estate investment trusts or REITs are companies that own, operate, and finance income-producing real estate. They offer investors the opportunity to own a diversified portfolio of real estate assets, such as office buildings, shopping centers, apartments, and hotels, without having to directly purchase and manage individual properties.

Real estate investment trusts or REITs

How do REITs generate income?

REITs generate income by leasing their properties to tenants and collecting rent payments. The income generated by the REIT’s properties is distributed to shareholders in the form of dividends. REITs are required by law to distribute at least 90% of their taxable income to shareholders in order to qualify for special tax treatment. As a result, REITs can be an attractive investment for income-seeking investors.

Types of REITs

There are several different types of REITs, including:

  • Equity REITs: These REITs own and operate income-producing real estate properties and generate income from the rent paid by tenants.
  • Mortgage REITs: These REITs invest in mortgage-backed securities, rather than owning and operating real estate properties. They generate income from the interest payments on the mortgages they hold.
  • Hybrid REITs: These REITs combine elements of both equity REITs and mortgage REITs. They may own and operate real estate properties, as well as invest in mortgage-backed securities.

Advantages of investing in REITs

  • Diversification: REITs offer investors the opportunity to own a diversified portfolio of real estate assets, which can help to reduce the overall risk of their investment portfolio.
  • Professional management: REITs are managed by professionals who are responsible for acquiring and managing the REIT’s real estate assets. This takes the burden off of individual investors to directly purchase and manage properties.
  • Liquidity: REITs are publicly traded on major stock exchanges, which makes them more liquid than owning individual real estate properties.

Risks of investing in REITs

  • Market risk: Like any other investment, REITs carry some level of market risk. The value of REITs can be affected by changes in the real estate market, as well as economic conditions and interest rates.
  • Management risk: The performance of a REIT can be affected by the quality of its management and the decisions they make.
  • Leverage risk: Some REITs use leverage, or borrowing, to finance their operations and acquire additional properties. This can increase the REIT’s risk profile and make it more sensitive to changes in interest rates.

Before investing in REITs, it’s important to carefully consider the risks and potential benefits, as well as your investment goals and risk tolerance. You can also consult with a financial advisor for guidance.

Overall, REITs can be a useful addition to an investment portfolio, offering investors the opportunity to own a diversified portfolio of real estate assets and potentially generate income through dividends. However, like any other investment, REITs carry some level of risk and it’s important to do your own research and consult with a financial advisor before making a decision.

How to buy and sell REITs?

Real estate investment trusts (REITs) can be bought and sold just like stocks, through a brokerage account. Here are the steps to follow to buy or sell REITs:

  1. Open a brokerage account: In order to buy or sell REITs, you’ll need to open a brokerage account with a financial institution or online broker. This will allow you to trade stocks and other securities online.
  2. Choose a REIT: Once you’ve opened a brokerage account, you’ll need to choose the REIT that you want to buy or sell. You can use online tools or consult with a financial advisor to help you find the right REIT for your investment portfolio.
  3. Place an order: To buy or sell REITs, you’ll need to place an order through your brokerage account. You can choose to place a market order, which will be executed at the current market price, or a limit order, which allows you to set the maximum price you’re willing to pay (for a buy order) or the minimum price you’re willing to accept (for a sell order).
  4. Monitor your investment: After you’ve placed your order, you’ll need to monitor your investment and make any necessary adjustments as needed. This may involve rebalancing your portfolio, selling off underperforming REITs, or buying additional REITs to diversify your portfolio.

It’s important to note that investing in REITs, like any other investment, carries some level of risk.

There are many real estate investment trusts (REITs) that are publicly traded on major stock exchanges. Here are a few examples of popular REITs and their ticker symbols:

  • Equity REITs:
    • Simon Property Group (SPG)
    • Prologis (PLD)
    • Public Storage (PSA)
  • Mortgage REITs:
    • Annaly Capital Management (NLY)
    • New Residential Investment Corp. (NRZ)
    • AGNC Investment Corp. (AGNC)
  • Hybrid REITs:
    • Hannon Armstrong Sustainable Infrastructure Capital (HASI)
    • Ladder Capital Corp. (LADR)
    • EPR Properties (EPR)

This is just a small sample of the many REITs that are available. It’s important to do your own research and consider your investment goals and risk tolerance before choosing a REIT. You can also consult with a financial advisor for guidance.

REITs ETFs

You can also invest in REITs through exchange-traded funds (ETFs). There are several benefits to investing in REITs through ETFs:

  1. Diversification: REITs ETFs allow investors to own a diverse portfolio of real estate assets without having to individually research and purchase individual REIT.
  2. Professional management: REITs ETFs are managed by professional fund managers who research and select the underlying real estate holdings in the fund.
  3. Liquidity: REITs ETFs can be bought and sold on a stock exchange, making them more liquid than owning physical real estate assets.
  4. Lower cost: REITs ETFs typically have lower fees than actively managed real estate mutual funds.

It is important for investors to thoroughly research and carefully consider any investment before making a decision. That being said, some of the most popular REITs ETFs, based on assets under management, include:

  1. Vanguard Real Estate ETF (ticker: VNQ)
  2. iShares Core U.S. REIT ETF (ticker: USRT)
  3. Schwab U.S. REIT ETF (ticker: SCHH)
  4. Invesco S&P 500 Equal Weight Real Estate ETF (ticker: RWRE)
  5. iShares Global REIT ETF (ticker: REET)
Categories
Stock Market Investing

Index Funds Investing

Investing in index funds is a simple and cost-effective way to diversify your investment portfolio and potentially earn long-term returns.

Warren Buffet, one of the most successful investors of all time, is a strong advocate for index fund investing. In a 2013 interview with CNBC, Buffet stated that “for the great majority of investors, therefore, a low-cost S&P 500 index fund will prove the better choice” over actively managed mutual funds. Buffet has also said that he believes index fund investing is a “terrific” way for most people to save for retirement.

Buffet’s endorsement of index fund investing is based on the idea that it’s difficult for individual investors or even professional fund managers to consistently outperform the broader market over the long term. By investing in a low-cost index fund that tracks the performance of a broad market index, investors can potentially earn returns that are similar to the overall market, without having to try to pick individual stocks or actively manage a portfolio.

Charlie Munger, the business partner of Warren Buffet, has also expressed his support for index fund investing. In a 2017 interview with CNBC, Munger stated that “I think if you’re intelligent, you’ll buy a very low-cost index fund.” Like Buffet, Munger believes that it’s difficult for individual investors or even professional fund managers to consistently outperform the broader market over the long term. By investing in a low-cost index fund that tracks the performance of a broad market index, investors can potentially earn returns that are similar to the overall market, without having to try to pick individual stocks or actively manage a portfolio.

Munger has also said that he believes index fund investing is a “no-brainer” for most people and that “if you’re not an expert, you’re going to do very well” with index fund investing. However, it’s important to note that Munger’s endorsement of index fund investing is not a guarantee of future performance and that investing in index funds carries some level of risk, like any other investment. Nonetheless, Munger’s endorsement highlights the potential benefits of index fund investing as a simple and cost-effective way to diversify your portfolio and potentially earn long-term returns.

It’s important to note that Buffet’s endorsement of index fund investing is not a guarantee of future performance and that investing in index funds carries some level of risk, like any other investment. However, Buffet’s endorsement highlights the potential benefits of index fund investing as a simple and cost-effective way to diversify your portfolio and potentially earn long-term returns.

Here’s how to get started:

  1. Determine your investment goals: Before you start investing in index funds, it’s important to have a clear understanding of your financial goals. Do you want to save for retirement, buy a house, or simply grow your wealth over time? Knowing your goals will help you determine the right mix of investments for your portfolio.
  2. Understand the basics of index funds: Index funds are investment vehicles that track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. Rather than trying to pick individual stocks or actively manage a portfolio, index funds simply follow the index and offer investors a low-cost way to diversify their investments.
  3. Choose an index fund: There are many different index funds to choose from, each with its own specific focus. For example, you can invest in an index fund that tracks the S&P 500, which is made up of 500 of the largest publicly traded companies in the United States, or you can invest in an index fund that tracks a specific sector of the market, such as technology or healthcare.
  4. Decide on your allocation: Once you’ve chosen an index fund, you’ll need to decide on your allocation, or the percentage of your investment portfolio that you want to allocate to the index fund. This will depend on your investment goals, risk tolerance, and overall financial situation.
  5. Open a brokerage account: In order to invest in index funds, you’ll need to open a brokerage account with a financial institution or online broker. This will allow you to buy and sell investments, including index funds, online.
  6. Begin investing: Once you’ve opened a brokerage account and chosen your index fund, you can begin investing by purchasing shares of the fund. You can choose to make one-time purchases or set up automatic investments on a regular basis.

It’s important to note that investing in index funds, like any other investment, carries some level of risk. It’s always a good idea to do your research and consult with a financial advisor before making any investment decisions. With a little bit of planning and due diligence, however, index funds can be a smart and straightforward way to diversify your portfolio and achieve your long-term financial goals.

What are the benefits of index funds?

  • Diversification: One of the biggest benefits of index funds is that they offer investors instant diversification. Because index funds track a specific market index, they give investors exposure to a wide range of companies and industries. This can help to reduce the overall risk of your investment portfolio.
  • Low costs: Index funds typically have lower fees than actively managed mutual funds. This is because they don’t require a team of fund managers to constantly research and select individual stocks. As a result, index fund investors can keep more of their returns.
  • Professional management: Index funds are managed by professionals who are responsible for tracking the performance of the underlying market index and making sure the fund stays aligned with it. This takes the burden off of individual investors to constantly monitor and adjust their portfolios.

How do I choose an index fund?

When choosing an index fund, it’s important to consider your investment goals and risk tolerance. Some factors to consider include:

  • Market focus: What market or sector does the index fund track? For example, if you’re interested in tech companies, you might consider an index fund that tracks the NASDAQ.
  • Expense ratio: The expense ratio is the annual fee that the fund charges for its management and operation. A lower expense ratio means that you’ll pay less in fees, which can help to boost your returns.
  • Minimum investment: Some index funds have minimum investment requirements, which can be a barrier for some investors. Make sure to check the minimum investment amount before choosing a fund.
  • Past performance: It’s always a good idea to review the past performance of an index fund before investing. While past performance is not necessarily indicative of future results, it can give you an idea of how the fund has performed in different market conditions.

Once you’ve considered these factors, you can use online tools or consult with a financial advisor to help you choose the right index fund for your investment portfolio.

Here are a few examples of popular index funds and their ticker symbols:

  • S&P 500 index fund: This index fund tracks the S&P 500, which is made up of 500 of the largest publicly traded companies in the United States. Some popular S&P 500 index funds include:
  • Vanguard 500 Index Fund (VFIAX)
  • Schwab S&P 500 Index Fund (SWPPX)
  • Fidelity 500 Index Fund (FXAIX)
  • Total stock market index fund: This type of index fund tracks the performance of the entire U.S. stock market, rather than just the S&P 500. Some popular total stock market index funds include:
  • Vanguard Total Stock Market Index Fund (VTSAX)
  • Schwab Total Stock Market Index Fund (SWTSX)
  • Fidelity Total Market Index Fund (FSTMX)
  • International index fund: This type of index fund tracks the performance of stocks in foreign markets. Some popular international index funds include:
  • Vanguard FTSE Developed Markets Index Fund (VEA)
  • Schwab International Index Fund (SWISX)
  • Fidelity International Index Fund (FSIIX)

These are just a few examples of the many index funds that are available. It’s important to do your own research and consider your investment goals and risk tolerance before choosing an index fund. You can also consult with a financial advisor for guidance.

Exchange-traded funds (ETFs) and index funds are similar in that they both track a specific market index or sector and offer investors a low-cost way to diversify their investments. However, there are a few key differences between the two:

  • Structure: ETFs are structured as a collection of securities that trade on an exchange, similar to stocks. Index funds, on the other hand, are structured as mutual funds and are bought and sold directly through the fund company or a broker.
  • Trading: ETFs can be bought and sold throughout the day on an exchange, just like stocks. Index funds, on the other hand, are only bought and sold at the end of the trading day, based on the fund’s net asset value (NAV).
  • Minimum investment: Some ETFs have minimum investment requirements, while others do not. Index funds may also have minimum investment requirements, depending on the fund.
  • Fees: Both ETFs and index funds typically have low fees, but ETFs may have slightly lower expense ratios on average. However, it’s important to compare the fees of individual funds before making a decision.

Ultimately, the choice between an ETF and an index fund will depend on your investment goals, risk tolerance, and financial situation. Both types of investments can be effective tools for diversifying a portfolio, but it’s always a good idea to do your own research and consult with a financial advisor before making a decision.

Here are a few examples of popular ETFs:

  • S&P 500 ETF: Some popular ETFs that track the S&P 500 include:
  • SPDR S&P 500 ETF (SPY)
  • iShares Core S&P 500 ETF (IVV)
  • Vanguard S&P 500 ETF (VOO)
  • Total stock market ETF: Some popular ETFs that track the total stock market include:
  • Vanguard Total Stock Market ETF (VTI)
  • iShares Core S&P Total U.S. Stock Market ETF (ITOT)
  • Schwab U.S. Broad Market ETF (SCHB)
  • International ETF: Some popular ETFs that track foreign markets include:
  • Vanguard FTSE Developed Markets ETF (VEA)
  • iShares MSCI EAFE ETF (EFA)
  • Schwab International Equity ETF (SCHF)

Again, these are just a few examples of the many ETFs that are available. It’s important to do your own research and consider your investment goals and risk tolerance before choosing an ETF. You can also consult with a financial advisor for guidance.

I hope this helps! If you have any additional questions, don’t hesitate to ask.

Categories
Increase Your Income

Increase Your Income From Your Day Job: Ask For A Raise!

In most companies, most decently run companies anyways, it’s usual to have a yearly performance review where the compensation is adjusted.

Asking for a raise

Getting a raise is the most common way to increase the income from your day job. It’s usually the easiest as it does not involve looking for a new job, you also usually have a good insight about the company and the opportunities.

Be prepared!

Before asking for a raise, you must be prepared. Keep in mind that it is not about what you think you deserve, but about building logically the evidence:

  • Compile what you came in to do, it is usually in your job description and compare that to what you are doing day to day. Look everywhere where you took on additional responsibilities beyond the scope of your role.
  • Look what the industry is usually paying for a position similar to yours. Popular websites such as payscale.com, salary.com or glassdoor.com can give good analysis for your position based on the number of years of experiences, the job, the state and so on. It is always good to regularly check what the market is paying for the job you provide and if you notice that your pay is well below the market, you’ll want to have a productive discussion with your manager to try to find out what it is possible to get.
  • You should be able to name a number, based on your analysis. Keep realistic expectations for the role: if you’re already paid well above the median compensation for your role (taking into account new responsibilities), it will be hard to justify a raise.
  • Try to assess how much value you are bringing to the company as you cannot be paid more than what you make the company earn.
  • If you’re lucky enough to have job where you can be compensated with equity, via RSUs (Restricted Stock Unit), SARs (Stock Appreciation Rights) or stock options, try to optimize for equity compensation over salary. Especially if you believe in the company you work for. After all you probably chose to work for such company for a reason. Because the equity can grow exponentially over time, particularly if the company is doing well, while the salary only put a floor as to how much you earn while employed, but there’s only limited upside.

When to ask for a raise?

Asking before the often traditional annual performance review is usually a good time.

After accomplishing a major milestone you played a significant role in is also a good time to ask for a raise.

Avoid asking for a raise when the company or your management is under pressure or when the company has financial troubles. It will be very unlikely under these circumstances.

How to ask for a raise?

Be confident, be enthusiastic, be clear and go through your analysis logically.

If your request is denied, stay positive and ask what would merit a raise, so you can better prepare your case for the next time around.

Looking for another job

Now if the company you’re working for is not willing or able to compensate you at the level you think is right, it’s probably time to look around for a another job.

There may be several reasons to look for another job from looking for a different work culture, to the company going under, or looking for a career change.

However a good rule of thumb coined by former engineer and venture capital investor Garry Tan: Learn, Earn or Quit! Which in essence says that you want to stay at your current job as long as you learn and/or earn. But if you don’t, it’s probably time to quit.

If you’re looking for opportunities keep an eye on positions inside your company, especially in bigger companies where there can be a significant upside between different departments. You’ll generally have an edge as you know the company.

If you’re employed, be discreet when looking for another job, avoid advertising it publicly as it may be sent to your current employer. Only use your personal device, never your employer’s device when looking for a job. On social media, such as linkedin.com, favor personal messages.

If you’re serious about going for a change, make time for the search.

As you’re getting information for new positions, try to understand the role for the new jobs you’re looking at so you can make an educated guess regarding the opportunity and the potential growth in the new role. Also if there are things you found you particularly dislike about your current job, try to find more information as to not end up in a similar place.

Circling back about getting a raise and if it was the main reason you looked for another job, if you’re valuable to your company and you have a competitive offer, it will more often than not open a compensation discussion quickly as it’s often cheaper for the employer to match or raise the offer, rather than trying to find somebody else to hire and train.

Finally if you have the choice between several offers, favor companies that have a liquid equity compensation. Equity compensation at early startups probably deserve their own post.

How often should one change jobs

If the growth and opportunities for a higher pay are limited at your current job, changing job can be the right move. It is often recommended to stay at least 2-3 years at a company as changing jobs too often may be a red flags to many employers.

References:

How to ask for a raise?

Learn, Earn or Quit

Good reasons to start looking for a new job

How to find a new job while you’re still employed

Categories
Increase Your Income

Target Higher Paying Jobs

If you have a passion and you see yourself doing it for the rest of your life, go for it. No amount of money will bring you more joy than doing what your truly love. That said not everyone has a passion or it may take time for someone to find its true calling or it’s just not your personality and you’d rather do something for while and then move on to something completely different. If that’s you, you’re not alone and that’s OK. So if you see yourself being able to different things, it may be worth looking at the potential paycheck for each of these things.

After all if you’re equally excited by a few opportunities, you might as well go for the one that pays the most.

If you’re lucky enough to be about to go to college or are in college and you’re not sure in which area you should study, take a bit of time looking at the average salary for the industry people from a given major go to.

For the U.S. job market you can check the website of the Bureau Of Labor Statistics.

Glassdoor.com and salary.com are also good sources. For tech jobs, levels.fyi is a pretty good source.

If you’re completely undecided, just have a look at the highest paying jobs and check if there’s a job that may seem appealing to you.

If college is not for you, becoming a real estate agent or a realtor can be a good move, especially if you expect to eventually earn some passive income through real estate investing.

You can also try summer sales, where you will get some mentorship and the opportunity the make money along the way, if you can handle rejection or want to explore developing this skill. Learning to sale is an invaluable life skill and spending a summer learning the rope is definitely some time well spent. Because let’s face it everything in life is about sales: if you have a day job, you need to learn to sell yourself, if you start a company you need to understand how to sell a product or a service for the company to be profitable. If you invest, it’s likely that at some point you’ll need to sell some of investments to buy others and learning how to sell right is important.

 

Categories
Reduce Spending

Save On Food

Food is in the top 5 of household expenses, so it is important to keep an eye on the food budget.

We could go very deep into how you can save on food, how to use coupons, what grocery stores can offer the best deals, but we’ll try to keep this one very simple as we feel that there are very quickly diminishing returns in trying to reduce food expenses.

The main factor driving up food cost is eating out. So keep eating out to a minimum. And that’s it! With that simple advice you’ll save the bulk of your money on food.

Then, if you’re on a stretch you can add:

  • No premade food, cook your own!
  • drink more water, remove soda and alcohol from your diet
  • if you eat meat, buy chicken, turkey or pork (if you can) rather than beef

And no, you do not need to eat ramen all year long. Rice, pasta, beans, lentils can serve as a good base. But you’d be surprised to realize that veggies are not always extremely expensive and the variety of meals you can easily cook can allow you to have a healthy diet without breaking the bank on food.