Investing Plans and Analyses

Hello readers,

In this article, I discuss my investment goals, strategies, and portfolio. I additionally offer suggestions for what to do with your stimulus checks.

Key Points

  • A detailed explanation of my personal goals for 2020 and beyond.
  • A brief overview of US household incomes, where I analyze the inadequate level of preparedness they face.
  • Suggestions on what to do with your $1200 stimulus check
  • Detailed insight into my investing strategy by looking into my portfolio. I will be showing the stocks that I have purchased recently and why these are good picks.
  • Recommendations for financial sources

Personal Goals

I have recently taken up investing as something to practice religiously, prioritizing my future and encouraging my friends to learn about this topic as well.

One of the most important things we can do while investing is to start early. The ability to utilize compound interest is in our favor the younger we start.

To give you an idea of how important compound interest is, imagine you deposit $100 into your savings account. Your APR is 1.70% and each month you are able to deposit an additional $100. As it accrues interest over 10 years, compounding annually, it will reach a total of $13,138.70. Without the interest you would have only accrued $12,100.

Compound interest calculator
Source: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

By taking advantage of a compound interest savings account, you are able to put your money to work. Saving and investing are connected by compounding annually, which is why it is important to start now if you haven’t already.

My goals for 2020 and beyond

  • Max out my Roth IRA every year.
  • Save 50% of each paycheck (House down payment and emergency fund).
  • Continue investing 25% of each paycheck.
  • Be conservative with the remaining 25%.

Despite the current uncertainty, I would strongly encourage investors to stay on track with their goals, never sell for a loss, continue to buy and hold if feasible. Consider the plummet as a chance to purchase stocks on sale, as history shows that the market always rebounds with greater momentum.

100-year historical chart of DJIA
Source: MacroTrends

Looking closely at this graph, we can see that history supports the fact that the market always rebounds. No matter how much the market drops, it will always rebound with higher returns.

To put it into perspective, 2008’s recession was devastating to the economy, ruining careers and financial stability across the nation. It took the economy five years to rebound to where it was prior to the recession. After that, we experienced an eight year run with incredible returns, exceeding expectations from all the naysayers and experts that speculated that another recession was underway.

This implies that you have to be able to withstand the fear mongering, hysteria, and news when you are investing for the long term.

If you are considering investing, I encourage you to take advantage of this opportunity right now as some sectors, such as REITs, are at their 2008 prices.

I encourage you to incorporate dollar cost averaging as your method of investing if you are someone like me, who has limited income. This way you will continue to invest without feeling like you have made a mistake by buying at a price point that you thought it was low, just to see it drop shortly after.

US Household Income

The social stigma surrounding talk about money and investment often deters individuals away from recognizing its importance.  People in their early 20s often fail to prioritize investing and saving.

A study performed by Bankrate in January 2020, indicates that 41% of Americans are capable of handling a $1,000 emergency. The remaining 59% are forced to either reducing their spending, or borrow money.

Poll performed by Bankrate

Comparing both of these data sets, it is apparent that many households are unable to cover a $1,000 emergency expense, considering they do not have a proper savings account.

What I am doing with my stimulus check

Unfortunately, I am claimed as a dependent, which would make me disqualified for the check. Refer to my previous article to see if you are qualified.

However, I will be breaking down the process in which I would go through if I were receiving the check:

  • Make sure your living expenses are paid and can be paid the following month
  • Restock on groceries, pay your debts and double check your bills
  • Check your emergency fund, does it meet the 3-6 month minimum?
  • Put the check into a high yields savings account or invest it.

Check to make sure your bills are covered for the remaining month and into next month if you’re unemployed. This way you will have a safety net for the time being, rather than spending it on unnecessary items.

Assess your current conditions, are you in a comfortable position with your groceries, debt, and bills?

If you happen to be in the clear for your basic needs, then look into saving for your emergency fund. The recommended amount of money you need to have for an emergency fund is 3-6 months of living expenses.

To assess, go to your previous billings for last month and see what was a recurring payment. Once you have added up all your expenses, if plausible, see what you can reduce to save yourself money.

With any leftover money, I would encourage you to save it as an emergency fund. Despite having the ability to make returns in the short run with this money, through investing in the stock market, you are much better off having this money in a high yield savings account. Think of the worst case scenarios, anything can happen in an instant.

Again, if you find yourself fortunate enough to have this excess sum for leisure, consider putting it into your emergency fund.

High Yield Savings Account

Photo by John Guccione http://www.advergroup.com on Pexels.com

Now, if you’re curious about how to make your money work for you and with a safety net that would prevent your hard earned money from losing value. I urge you to look into online banks.

Many high yield savings account are online, allowing users to experience efficient transfers, high interest rates and they are FDIC insured.

I prefer to use Ally bank, due to the 1.5% interest rate, $1 minimum to have an existing account, available on app store, and minimal fees.

  • 1.5% Annual Interest Rate.
  • Available on IOS and Androids.
  • 3 day guarantee transfers.
  • Investing service with 0 commission fees.
  • FDIC Insured.
  • 6 withdrawals and transfers per statement cycle.

There are plenty of other high yield savings account providers out there, so don’t just take my word for it. I recommend looking around to see what other online banks offer, as some of them have better interest rates, fees and services.

To name a few online banks,

Again, these are just a few of many online banks and there are plenty more with even higher annual interest rates. I strongly urge you to do your due diligence before signing up with an online bank as you might find something better.

Why not brick and mortar banks?

Brick and mortar banks tend to have very low interest rates for savings accounts. In my case, as a Chase bank customer, I have the privilege of receiving a 0.01% interest rate.

Comparing online banks to brick and mortar, it is a no brainer if you are planning on building your emergency fund, down payment or building a long-term savings account.

The only justifications I can see with utilizing a brick and mortar savings account is the convenience. Brick and mortar banks offer in-person answers, ATMs with no fees and they do not require internet knowledge to be used effectively.

Deterrents that are present with online banks are potentially high ATM fees, transaction times and can be confusing for someone who does not know much about the internet.

Although these inconveniences for customers might be a nuisance, the overall return of your account’s value outweighs this dilemma. Their customer service is exceptional as well, so do contact them if you are confused about setting up an account.

My Investing Strategy

Intelligent investors have a set of rules that they follow to maximize their gains while minimizing their losses.

As the volatility of the market is prevalent, many new investors will panic and sell for a loss while they purchased at a high. It is also applicable to panic buying, as the fear of missing out is always looming over new investors. Both are an unsustainable and incorrect way of investing smartly.

In times of uncertainty it is important to remain steadfast and stay true to your investing habits. If you are the type of person to panic when your portfolio tanks a couple percentages, then I suggest you leave your money in a CD or a savings account.

When I am talking about investing habits or financial habits, I am stressing the importance of setting up a discipline where you will continue to buy and hold or just abstain throughout the situation until the volatility is less apparent.

In my case, each paycheck I deposit 25% into my brokerage, 50% into my savings and the remaining cash I have for fixed expenses and basic needs.

The main goal is to remain consistent with investing and saving.

While you are developing your financial habits, you should set up a direct deposit that will automatically take a percentage of your check and deposit it into your savings account.

This amount can vary to whatever you are comfortable with depositing, but it is always important to start with something rather than nothing.

My Portfolio

I recently started investing a little over a year ago, as I found myself being more aware of my financial situation and where I want to be in life in the next ten years.

I think the overall importance of obtaining financial freedom is something that has always been a priority for me as I come from a lower income household.

Although I have only used two online brokerage services, Robinhood and M1 Finance. M1 Finance is by far the best service that I have utilized.

Their service offers similar things to many brokerages but the key differences that I noticed.

  • Offering retirement accounts, trust and joint accounts.
  • Offering fractional shares.
  • Borrow against your portfolio for low rates.
  • Automated portfolios (Similar to acorns investing pies).
  • Automated share buy and sell based on your pie
  • $10 referral program, “Give $10, get $10”

Here’s a snippet of my current portfolio.

M1 Finance Portfolio
Investment Tracker created by Joseph Carlson

The sole purpose of this portfolio is to allow me to obtain financial freedom in the future. I am hoping that in ten years or so, it will have the ability to generate enough dividends where I can live off that.

I am not intending on retiring any time soon, but to contribute to this portfolio is something I find interesting as it continues to grow. The volatility of the market will continue to test my tolerance but after this ordeal ends I can be assured that the market will return to even greater heights.

It is important to remain steadfast as an investor and not fall into the hysteria that many Americans are experiencing. Instead, take this time to rebalance your portfolio if you have the means to.

Recently, I have been increasing my stakes in companies like Disney, Main Street Capital and Merck & Co.

I will be tracking this portfolio throughout my blogging journey, as well as to provide a detailed snippet of the growth and process as an intelligent investor.

Analysis for Stock Picks

The companies I listed above were the main stocks that I continued to invest in throughout this downturn. All the companies that I have doubled down on are companies that I believe will survive and continue operations after this ordeal ends.

Disney (NYSE: DIS), I strongly believe that their current valuation of $99.60 per share is a great sale for this company. The last time they were valued at this price was in 2015!

Disney stock value chart, 5 year timeline.
Source: SeekingAlpha.com

They offer a great streaming service, incredible parks and Disney as a brand has always been a forefront for creativity and innovation.

While everyone is staying indoors, they can sign up and access Disney’s content exclusively on Disney+. This puts them in a much better position as they are able to provide value while their parks remain closed.

When this whole pandemic ordeal ends, quarantines are less prevalent and society is pretty much back to normal. I believe that people will be itching to go to their nearest Disneyland park.

Main Street Capital (NYSE: MAIN), currently valued at $21.47 per share is now half its valuation since January. The dramatic decline in value is a result of recent events with layoffs. Stores closing and being unable to produce drastically affects the portfolio that MAIN deals with.

MAIN stock value chart, 10 year timeline.
Source: SeekingAlpha.com

MAIN is a lender for business development companies, which are usually low to mid level businesses that banks normally would not offer loans due to the risk involved. Their revenue stream comes from high interest rates and equities stakes within the companies they invest in.

MAIN currently has 185 companies in its portfolio within 50 industries, which makes its diversification exceptional. Despite the decline, I believe MAIN is a great buy and hold option due to its management, financial strategy and business plan.

Merck and Co (NYSE: MRK), one of the largest pharmaceuticals in the world, currently valued at $73.38 per share equivalent to its late 2018 prices is a good price for this company.

MRK stock value chart, 5 year timeline.
Source: SeekingAlpha.com

I believe that MRK is more than capable of withstanding the effects of this downturn due to their drug and medicinal production. On top of this, their production and advancement of Keytruda have played a vital role in their revenue stream.

Overall, MAIN is my riskiest pick of these three, as their business handles loans which is difficult to liquidate. My portfolio is set up for dividends, which is not concerned with overall market gains.

My Financial Sources

Financial information is abundant out there, yet with that in mind a study performed by National Foundation for Consumer Credit in 2019, indicates that only a whopping 55% of Americans are confident with their financial knowledge.

The study continues to detail out the overall confidence of American’s financial literacy and the consensus is we are regressing from previous years in literacy and overall confidence.

Luckily, I have a few sources that I frequently go to in order to help further my understanding of personal finance and market trends.

My suggestions for financial information on YouTube:

These are just a few of many incredible channels that offer an abundance of information for free. They cover topics such as real estate, market trends, investing, savings, credit card churning and plenty more.

My M1 Finance portfolio is inspired by Joseph Carlson, he offers high quality analyses on topics regarding current events, stock market trends and other news that affects the market.

Graham Stephan offers timeless information that can be referred back to at any point. His content varies from real estate investing to business development and credit card churning.

Dave Ramsey is one of the most well known financial experts when I think of finance as a topic. His channel offers guidance to people who are curious about their financial situation, how to correct it, what they should continue doing and what to cut to get them where they want in life.

Suggested financial books to read:

Suggested Websites:

Although these are just a few of many sources out there, I frequently go back to them for more information as the content is reflective of modern times.

I hope you found my article informative and persuasive if you were on the fence about investing and saving. Feel free to contact me about any questions, feedback or would like to discuss anything.

Email me at smai31@uw.edu

Note: This was a really long one and it was set up this way for me to be able to go back in the future and see what has changed. Thanks again for taking the time to read through this!

Published by Steven Mai

Hello! My name is Steven Mai and I am currently enrolled at University of Washington. My interests are business, investments, financing, and personal development. I hope through this journey I will be able to enhance my skills as a writer and share my ideas on a public platform and gain the necessary skills in life through interactions with the community.

4 thoughts on “Investing Plans and Analyses

  1. Great material! To add to your list of suggested websites- i’ve found seeking alpha to be very helpful for me. Gives me all the key financial #’s I need to look at and review before making an investment.

    Like

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