Lazy Money

My goal for September is to learn about the stock market and buy stock.  Let’s hope I’m rich by October….

As always, I like to share what my knowledge is going into a new goal so you know where I’m coming from: I took a finance class in my MBA where we learned about stocks.  I hated the professor and she mostly talked about herself, so I only knew general terminology for the length of the course and then it was deleted from my brain.  I have a friend who works in finance that I know invests in stocks.  I have clicked on my stock app on my iPhone on accident between 7-10 times in my life.  I don’t know where you go to purchase stocks, what the minimum amount is you need to invest, and I don’t know the average length of time someone owns a stock before they sell them.  I know a friends dad who retired and has a lot of stock.  I also envision anyone who owns stock to be someone who is financially savvy.  I would describe myself as financially responsible/smart and always plan and save, but I definitely lack knowledge on investing.  So….let’s buy a small portion of a lot of companies this month!

Sept 1:  This goal comes at good timing because we started seeing a financial advisor a couple months ago which will be the answer to all my stock market questions!

I’ll start with the financial advisor recap before I jump to what I’m learning this month:

We met with a financial advisor 4x so far which included the general get-to-know-you time, the prove-you-have-what-you-say-you-have time that included bringing every financial and even non-financial related documents that have ever been associated with our names (thanking myself for being organized!), then there was the this-is-what-I-recommend-for-you visit, and then there was the lets-start-moving-on-what-was-recommended trip.  Every meeting exceeded 2 hours while we each downed 3-4 mini waters they gave us as we jotted down various notes about our future and traced the outline of the letterhead on their pads of paper.

The financial advisor came as a referral from a friend who works in finance (because realistically, how the heck do you know where to start with finding a financial advisor you can trust?!  I recommend asking someone who you think is making smart financial decisions and ask them who they go to).  Seeing a financial advisor is not convenient or fun, but necessary and makes you feel very mature.

A couple notable/relevant things from the meetings that I’ll be chatting about this month are…

1.  The financial advisor said we have “lazy money.”  After we both had our initial defensive ‘we’re not lazy’ reactions, he proceeded to tell us that doesn’t mean we’re lazy, it means our money is lazy.  Meaning, it’s sitting in a savings account with extremely low interest and is not working for us or making any additional money for us (which is exactly why we were there/seeking advice on/this is what will lead us to invest money in the stock market).

2.  Like most people, we do not actively manage our 401k accounts (until now!), we simply selected an option when we enrolled and just let it accumulate/adjust and never log in and change the investments.  I mean, let’s get real, you start your new life/job at a company and you buy some new business clothes and you go to an orientation and you meet new people and you try to prove yourself and somewhere in the middle of this chaos a gigantic package arrives about 60 days in that guides you to your 401k options.  You’re so busy getting a new badge at work and tracking down your spouse’s social security number to list them as your beneficiary that you are just happy to have selected a 6% contribution because that’s what your mom or a friends dad always told you to do – you’re not thinking about how to diversify your portfolio and likely don’t even realize you’re supposed to be thinking about that.  Matter of fact, if you’re lucky, you’ll sit in a cubicle next to someone that says “yeah, I just picked the package that’s based on your age and it will adjust for you as you get older.”  You decide to do that too and then go to lunch with your new work friends and only look at your balance when it’s time to do your taxes.

I honestly didn’t even know you could actively manage your 401k by choosing your investments and trading on a regular basis.  I’ll just get real and say that right now.  I go between feeling dumb about that fact and feeling smart that I’m proactively learning about it now.

So….long story longer….thanks to direction from our financial advisor we will be investing in the stock market in addition to actively managing our 401k’s.

I’m going to be researching and sharing general stock market terms and how it all goes down here (because I still don’t know despite that back story), but I will give you the quick blurb of what/how it goes down for a 401k before I move on because I did select specific stocks based on what the advisor told me to do.

If you have a 401k and you want to actively manage your investments (this at least applied to mine which is through Fidelity), then you have to log into your account and move your money into a brokerage account.  For example, if my 401k is through Fidelity then I log into that account and within Fidelity itself there’s an option for a brokerage account.  It will take a day or two to move your money over but it’s ultimately moving it to a place that you can then buy or sell shares.  From there, you buy the shares you’re seeking and can personally go in at anytime to buy/sell (there is a fee associated each time you make a trade, something like $7.95 per trade).  I sound like an expert (you were thinking that too, right?) but I know nothing about what I am invested in at this point.  I simply followed the instructions of our financial advisor and selected a portfolio based on what he said.  This is why I am doing this research….and since we would like to invest money in the stock market outside of just our 401ks.

P.S.  Fidelity has an app that makes trading even easier.  I literally selected my entire 401k portfolio during a layover in Texas while on vacation.

Sept 2:  If you are still with me after all the fancy financial jargon like “portfolio” and “diversify” on day 1 then you’re either an expert already and are checking my facts/knowledge, or you’re really interested in learning too (yay!).  Here’s the elementary stuff I’m starting out with –  I went to my ole pal (YouTube) and typed “stock market for dummies” and watched a couple animated videos that were exactly what I needed!  Here’s how smart I am on day 2.

-A company can be private (owned by 1 person or a small group) or public (they allow the public to purchase a percentage of their company via stocks).  If you purchase stock (aka “share”) then you’re purchasing a small piece of a public company.

-If a company goes public, it’s a way for them to get more money to expand/produce more without going into debt by getting a loan.

-There are 2 ways you can make money in the stock market.  1.  Buying stocks at a low price and selling them at a high price.  2.  Receiving a dividend from the company you own stock in, which is a percentage of their profit.

-Animated videos are always easier to learn from.

Sept 3:  I came home to a giant package in the mail with the rundown of all the stocks I recently purchased for my 401k.  I felt responsible.  I logged into my Fidelity app to check if my 401k had doubled and I was on track to be a millionaire before age 35.  There were things in green and things in red and none of which did I understand.

I watched another YouTube video which taught me that the way we read the stock market is through the Stock Market Index which is the average of specific groups of stock prices.  I need to watch more videos on this because it was a quick overview and it’s kind of like when I go to the horse races.  For the 2.5 hours I’m there I know how to read that the horse named “Diamond Flame” won their last 3 races and the purse payout and the odds they will be a part of the trifecta I just bet on, but then all is lost until I’m at the races again.  During the video I was nodding to myself and going “oh yeah, P/E ratio, I know what that is” and then when I tried to explain it to Chris I realized I didn’t know what it meant anymore.  Plus, the video said it’s printed in the paper each day but I never followed up to see where the official online version of the Stock Market Index resides.  I suppose that’s what I am looking at every time I accidentally click my stock app on my phone.  I will be a master at this by month-end, I promise.

A couple blurbs I took away from the videos I watched today…

-Every public company has a stock market symbol which are the 3 letters or 5 letters we see on our stock app or the Stock Market Index or other fancy places stock market stuff is published.

-Dow Jones is the average price of 30 large US companies

-S&P 500 is the average price of 500 US companies

-The stock market is global, you have options to purchase stock for companies that reside outside of the US

Sept 4:  Our financial advisor said you shouldn’t look at your investments everyday.  Since the only investments I have as of now are my 401k (even though I couldn’t articulate what I own) I decide to go ahead and look at my balance everyday.  Don’t do that.  Sometimes things are red and you lose money, sometimes things are green and you get money.  When it’s red it’s annoying.

Today I learned about “speculating.”  I’ve heard this described in 2 ways.  One definition of speculating is when you invest for a year or less.  It’s recommended that purchasing stock is a long term plan, so if you’re in the gig for <12 months then you’re “speculating” which sounds both cool and creepy.  It has also been described by a time when you’re buying stock in a company that is not making a profit.

I also learned that your common sense can be just as important when selecting stocks as expert advice.  I wonder if psychic readings count?

I text our financial advisor’s assistant today and said that I am back from vacation and would be emailing them soon with some additional questions so we could start moving forward with investing (and obviously I’ll be speaking all the right lingo by then).

Sept 5:  I’m realizing the stock market is just gambling.  Yes!

I learned that the reason they call it a “share” when you purchase stock is due to the fact that you’re purchasing your share of the company.  By buying shares, you’re “entitled to a small fraction of the assets and earnings of that company.”  An asset is everything they own including buildings and equipment.  I’m envisioning buying a share of an ice cream company and it all ends with me bringing home a giant freezer, tons of ice cream, and weird 1950’s ice cream shop hats.  I mean, do people really ever receive assets?  No.  Right?  Or do they?

I have so many questions teed up for the next few days like:

1.  If you need a broker, why can I select my own investments on my 401k (is Fidelity acting as my “broker” – I’m guessing that’s the answer).

2.  What is the New York Stock Exchange exactly and are people there everyday yelling out what they want to buy and why wouldn’t they do it online?  Is this like Black Friday shopping in person vs Cyber Monday shopping?  Who knows?

3.  Why doesn’t everyone buy Apple stock, aren’t they like….always making money?

4.  How much does it screw you over on taxes if you receive a sizable dividend?