Login | November 19, 2024
How to start
THE MOTLEY FOOL
Ask the Fool
Published: November 19, 2024
Q: What's the best way to start investing in stocks if you don't have much
A: It's best not to start investing until you've read enough to have a basic grasp of what you're doing. You might check out books such as "The Little Book of Common Sense Investing: The only way to guarantee your fair share of stock market returns" by John C. Bogle (Wiley, $27), "The Little Book That Still Beats the Market" by Joel Greenblatt (Wiley, $28) and "I Will Teach You to Be Rich: No guilt. No excuses. Just a 6-week program that works" by Ramit Sethi (Workman Publishing, $17).
Once you're ready to deploy your dollars to grow over time, you might start by investing in a simple low-fee, broad-market index mutual fund, such as one that tracks the S&P 500 index of 500 major American companies. Such index funds outperform most managed mutual funds over long periods, and they can be great long-term wealth builders. You can learn more at Fool.com by clicking on the "How to Invest" tab.
Q: What's a "run rate"? -- W.U., Salisbury, Maryland
A: It's an estimate of a measure for a longer period, extrapolated from the corresponding measure for a shorter period. So, for example, imagine that the Home Surgery Kits (ticker: OUCHH) company is growing quickly, with $50 million in sales in its last quarter. If you add up the past four quarters, they might reflect total sales for the year of, say, $140 million. But if you multiply the $50 million by four, you can refer to the company's run rate for sales of $200 million. That's a more accurate reflection of current sales.
Fool's School
Things To Know Before You Retire
Most of us are looking forward to retirement, but millions of us are not sufficiently prepared because our retirement nest eggs aren't large enough to support us through our later years. Indeed, fully 29% of workers have saved less than $25,000, per the 2024 Retirement Confidence Survey. Here are some things to know:
-- If you retire at 62 and live to, say, 92, your retirement will last 30 years. You may need to be saving more aggressively. Invest your long-term dollars effectively, too -- such as in a low-fee S&P 500 index fund.
-- Though Social Security is likely to be important to your future financial security, it may not pay you as much as you expect. The average monthly retirement benefit was just $1,920 as of August -- about $23,000 per year. (You can look up your own expected benefits at SSA.gov.)
-- As you plan for retirement, be sure to plan for health care costs, which could be high. Per Fidelity, "a 65-year-old retiring this year can expect to spend an average of $165,000 in health care and medical expenses throughout retirement." (And this doesn't include over-the-counter medications, most dental services and long-term care.)
-- It's important to plan for retirement. We should be making estimates of our expected future spending needs and then figuring out how we will meet them. It can be smart to set up multiple income streams if you can -- such as Social Security, dividend income from stocks, interest income from bonds and other savings, withdrawals from retirement accounts, rental income from properties, pension income and/or annuities.
-- If you're behind, you can improve your financial future in various ways. Some part-time work now and in your early years of retirement can help. It can also be powerful to simply delay retiring for a few years. That can allow you to sock away more money while letting your nest egg support you for fewer years. Learn more at Fool.com/retirement.
My Dumbest Investment
Sold a Winner, Kept the Losers
All of us have regrettable buys, such as some stocks I bought during the frothy 2021 to 2022 period. Those were recently down 80% to 90%. Ouch!
Regrettable sells? I've got those, too. I bought a few shares of semiconductor company Nvidia at $157 per share, but then got nervous due to its very high price-to-earnings (P/E) ratio and fast growth rate, based on some new thing few understood called artificial intelligence (AI). So, at $450 per share (almost having tripled my money), I placed a stop-loss order to keep some of the gain if it tanked. The shares were sold when they hit $407 during after-hours trading. And now, with the stock recently at $120 after a 10-for-1 split, I've managed to sell a winner and keep the losers -- not the best strategy. However, I did make some money. Shoulda, coulda, woulda. -- B.G., online
The Fool responds: If you're nervous, selling can be the right thing to do -- and you only sold part of your position in Nvidia, which can be a nerve-settling compromise. But if you read up and learn more, you'll see that plenty of top stocks have been rather volatile, and that companies growing quickly tend to command (and deserve) steeper P/E ratios.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Name That Company
I trace my roots back to 1845, when a father and son in Switzerland produced a chocolate bar. Some decades later, their business joined with another, and I was born -- enjoying success in part due to a novel "conching" process for refining chocolate. I joined with other chocolate makers over the years. My brands today include my namesake, along with Ghirardelli (founded in 1852), Russell Stover (1923) and Whitman's (1842). My wares are sold by 36 subsidiaries and regional offices, more than 100 independent distributors and 500-plus stores of my own. I rake in more than $6 billion annually. Who am I?
Last Week's Trivia Answer
I trace my roots way, way back to 1670, when I was chartered as a fur-trading company. That makes me Canada's longest continually operating company. A gold rush in the late 1800s led me to move into retail, setting up stores with a wide variety of goods. Based in Toronto and New York, I'm now a privately held business group known by my initials, and you'll find scores of my namesake stores across Canada and the U.S. I also own hundreds of other retail locations, with formats ranging from luxury to premium department stores to off-price fashion shopping destinations. Who am I? (Answer: HBC)
The Motley Fool Take
Stock ETFs To Consider
If you're not up for picking individual stocks on your own, consider mutual funds and exchange-traded funds (ETFs) instead. (An ETF is much like a mutual fund, but it trades like a stock.) Here are some (of many) solid ones to consider:
-- Vanguard S&P 500 ETF (ticker: VOO): If you own only one stock fund, this would be a good candidate, as it tracks the S&P 500 index of 500 of America's biggest companies, which together make up around 80% of the value of the total U.S. stock market. (Other low-fee S&P 500 index funds can serve you just as well.)
-- Vanguard S&P 500 Growth ETF (VOOG): This ETF focuses on the faster-growing portion (nearly half) of the S&P 500 companies. Its top holdings recently were Apple, Microsoft and Nvidia.
-- Schwab U.S. Dividend Equity ETF (SCHD): This ETF, with a recent yield of 3.6%, is focused on companies with relatively high yields. Its top holdings recently included Home Depot, Verizon Communications and Cisco Systems.
-- Technology Select Sector SPDR ETF (XLK): This ETF is for aggressive investors, as it's focused on technology companies that tend to grow briskly, but with above-average volatility. Top holdings recently were Apple, Microsoft and Nvidia.
Dig deeper into any ETFs that interest you. (The Motley Fool owns shares of and recommends the Vanguard S&P 500 ETF.)
COPYRIGHT 2024 THE MOTLEY FOOL, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut, Kansas City, MO 64106; 816-581-7500.