Single Girl Money | Dec 2018 Savings and Investment Update

Merry Christmas and Happy Holidays. I ain't got no friends, so I thought I might as well post this now. In case you’re just joining us, here’s a little bit about me.  I am a single 30-something, openly Christian, hesitantly immigrant-y, human woman. I love watching TV while eating takeout, and I want to retire early. I currently work as a consultant in a tele-health call center making around $40/hr. I started my professional life in 2015 at the ripe ole age of 31 after a few false starts. I spent 2016 paying off about $10,000 worth of credit card debt. I spent 2017 paying off about $20,000 in private student loans; I still have about $300,000 in federal student loans for which I am currently on an income-based repayment plan for the next 25 years, give or take.  I started really getting into savings and investing late 2017 when I stumbled upon the FIRE (financial independence, retire early) community.  In 2018, I made the decision to try to save for a sabbatical and maybe if all goes well continue the journey to early retirement.  Along this journey, I give all sorts of updates, just like this one.

This is the December 2018 Update of my savings and investments balances, i.e. my personal capital. I don’t call it net worth because my massive student loan debt keeps me at a negative net worth and frankly that’s discouraging.

I am getting a little faster at Excel, so this update did not take quite as long to chart as my September 2018 Savings and Investment Update.  We’ll utilize a similar structure here as well. Let’s get into it!

Let’s quickly recall some budget items:

2018 Savings goal: $37,000/yr (2017: no goal)
Monthly savings contributions: $3115/mon

Investments

My projected investment goal for the end of 2018 was $90,200. I contributed as planned, but I lost a significant chunk of my contributions as of 12/20/2018. It kind of sucked honestly, and it made me doubt this investing thing. I had been planning to update my stock allocation since my first quarter update, but since it was doing well, I didn't feel as compelled. Once I saw the loss, I got a little more motivated. This is NOT what you are supposed to do, but I did. My brokerage's advice blog said not to react emotionally to market fluctuations, but if you do, then do half of what you want to do. I heeded that advice. Both my 401k and brokerage accounts were allocated at 90/10 stock/bond. I changed my brokerage to the recommended 68/32 allocation (based on an early retirement age of 42).

That being said, you'll notice the dip in my investment balance.

Total Investment Balance: $83,815

Investment Losses - $10,000

It's been a hard pill to swallow. By my calculations, I've lost about $10,000 in four months. This is a lot considering I just started and it seems as though people with much larger investment portfolios haven't lost as much proportionally.

Investment Balance (08/30/18): $83,981

Contributions (Sep to Dec 2018): $9,956  (not including employer contributions)

Investment Balance (12/20/18): $83,815

Savings and Investments

When you add in my Safety Net Fund + Regular Savings and Checking, my savings and investment balance is bumped up a bit.

Total Savings and Investments: $120,285

Thoughts

My savings goal was $37,000 this year, I did contribute at least that much, but because of market losses, that is not necessarily reflected in the end of year balance.

For some perspective, here's how far I've come.

Dec 2017 (investments only): $51,333

Dec 2018 (investments only): $83,815

Difference: $32,482 (contributions of at least $37,401)

This is actually a little bit less than where I was at my September 2018 update. Womp, womp. I still have about $5,000 in savings that need to be transferred to my investment account, but I'm holding on to it for now until I get used to the loss. And as I have all year, I still have about 1 year of expenses as a safety net, in case of job loss or if I lose my mind and make a run for it!

So that was 2018, my first year in FIRE, my first year blogging about FIRE and my first year with a defined savings goal. How did your 2018 go?

#1 Way to Save 100k in Your 30s

I have been in the PF blogosphere for awhile now and have gorged on net worth updates and debt payoff stories. Much to my own chagrin I even published my own debt payoff story. I harbored some reticence because I didn't think the story was really much of an underdog story, but other bloggers had it as cornerstone content, so I did it too.

Lately, I've been stumbling on a few more how I saved x dollars by y time and while enticing at first when I close the post I find myself a little disappointed. It is all starting to get a little sententious for me, I suppose.

Case in point, when I did my post on selective poverty, I hoped to compare FIRE budgets with poverty and be surprised that wow, these people really are living on so little. The data didn't really show that. Then I remembered my own life. My aunt raised 4 kids (none of us were her biological children) on a max income of $40,000.   She did that because that was the best job she could find even after getting her doctorate. She faced a lot of discrimination and eventually went into substitute teaching and staffing group homes until she retired at age 62.

But while she was raising us, we ate free and reduced breakfast and lunch at school because we qualified for it; we had hand me downs and home-made clothes because before reaching her max income that's what we could afford. When things got better, we took lots of fun road trips around America with our pb and j kits in the back; sneaking into hotel rooms when they wanted to charge for each kid; splitting extra value meals at McDonald's; and getting Dairy Queen blizzards in the middle of winter when they were free.

So when I went to write my How I Saved 100k by Age 34 post, the idea stuck around in my draft list for two months because I couldn't in good conscience tell my 10 readers that the way to six-figure savings was to live simply- buying second hand stuff, using credit card rewards, getting a cool side hustle; oh and save 90% or more of your income.

No, I can't do that. I know better. So here's my #1 tip to saving $100k by your next milestone birthday...

#1 Find yourself in a position to earn $100k/ year and then don't spend half of it. Do that twice.

MERJ out!

When Can I Retire? Case Study: Nola, MD

CASE:
My first case study is a friend from college. She graduated with no debt from college due to an academic scholarship and generous parents.  By the end of medical school and residency, she had about $200,000 in student debt.  This brings us to now, almost 3 years after entering practice as a physician.

Current Spending: (estimates as she does not track her spending)
$2,500/mon on rent and utilities
$2,000/mon student loans
$400/mon eating out
$400/mon shopping
$450/mon travelling (couple trips a year)
Total spending: $5750/mon
Annual: $69,000 (65.7%)

Savings:
$3,000/mon (toward a down payment for a home)
Total saving: $3,000/mon
Annual: $36,000 (34.3%)
Assets: $100,000 in cash/savings

Other:
Has not given much to retirement.
Does not contribute to her 401k (expresses a desire but is not quite sure how to sign-up). Thinks there is a 5% match!
Knows that there was some automatic retirement contributions made during her residency years but is unsure how to access this information.
Her financial and lifestyle goals:
Pay off her student loan debt.
Buy a house between now and Oct 2018 with a $100,000 down payment.
Pay off house to minimize total interest paid.
Whenever she does retire, the Caribbean sounds nice.

RESULT:

At her current spending: $69,000/mon x 25 (using the rule of 4%) = $1,725,000 needed to retire
Using the Calculator, at her current savings, an compound interest rate of 6%:  Nola can retire in 21 years.

WHAT IF:

If Nola, were to spend like a resident ($45,000/yr net avg while in residency) and save the rest, her projected retirement using the variables above would be in:  12 years 
Annual spending: $45,000/yr
Amount needed to retire using 4% rule: $1,125,000
Annual savings: 105,000 - 45,000 = $60,000/yr

Suggestions:

• Consider tracking spending with a helpful tool like Personal Capital.


• Speak to HR rep and enroll in 401k. Max out 401k.


• Make a point to track down information for retirement contributions made during residency.


• To make a big impact on retirement goals, consider living like a resident, and saving like a physician.


• Open an investment account like Vanguard or Betterment and initiate auto-deposits.


• Consider a budget with any number of free budget spreadsheets available.

CONCLUSION:

Either way, with a hefty salary, Nola, age 34 could still leave the workforce before age 65 (traditional retirement) and retire in the Caribbean. If she lived like a resident, she could stand to reach that goal 9 years earlier!
Comment below with your thoughts!

UPDATE:

After I did the case study with Nola, she contacted her HR person at her current job and was able to locate information from residency for a 403b. She learned that her employer contributes 5% of her salary after 1 year of work even if she does not contribute! Free money! And she had a balance of $17,000 in her 403b plan from residency which she has rolled over to her 401k. Kudos to NOLA on a job well done! This is one FIRE'd physician! 

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I Took A 3rd Look at My 401k and This is What Happened

So in the wee hours of the late night or early morning before a work day, I try to find just one more way I can accelerate My Early Retirement Journey. I know I can probably cut it down comfortably to 15 years from 30 years, but can I do just a little bit more?

The FIRE blogosphere (millennial rev, ROG, jlcollinsnh, etc..) all swear by Vanguard. They tout the benefits of the Vanguard Total Stock Index and Vanguard Total Bond Index and denounce cherry picking stocks as according to them no one can outpace the stock market. Fine, I’m a big fan of #easychoice / not re-inventing the wheel. So I felt confident enough to put my new found knowledge into practice. I was going to allocate using the above index funds in an 80/20 allocation.

Behold my surprise when my 401k did not have both of those options. It had the Vanguard Total Bond Index but not the total stock! Not wanting to lose momentum, I tried to make the 80/20 allocation work with different funds I did find. My mind was unsettled and I stared at The Prospectus for 2 to 3 hours struck with decision paralysis. After the sun went down, I gave up. And kept my Target Date Fund at 0.77% management fee. Defeated.

Then two nights ago, I re-read jcollinsnh's post on a simple path to wealth for his daughter. He spoke more about tracking the S&P 500. It was a phrase I had seen circling the blogosphere but one to which I had not given additional thought. My brain finally remembered it had seen that in The Prospectus. (Admittedly, some of my better ideas come after the fact…) So I looked back at the Vanguard Funds available in our 401k.

I clicked on the one that looked most similar to what I was looking for. It was called the Vanguard Institutional Index (VINIX). It’s description read: The investment seeks to track the performance of a benchmark index that measures the investment return of large capitalization stocks. The fund employs an indexing investment approach designed to track the performance of the Standard & Poor's 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

Aha! S&P 500…that’s what I was looking for.
I turned to Google to find out the difference between the two (VFINX vs VTSMX).

MorningStar had this to say: For those who might be unfamiliar with the two index types mentioned, the S&P 500 tracks 500 of the largest U.S. stocks as measured by the value of their shares. ...Total stock market funds, on the other hand, include both large-cap stocks and the many small- and mid-cap stocks left out of the S&P 500.  As we've said, a total stock market index fund encompasses a wider universe of stocks than does the S&P 500, but the difference might not be as great as you think. Stocks in the S&P 500 make up about 75% of the total U.S. equity market, so the overlap is considerable. That said, the roughly 25% of the market that is found only in the total stock market index fund does provide greater diversification because of the presence of smaller stocks. For investors with small-cap exposure elsewhere in their portfolios, the large- and mid-cap S&P 500 fund may suffice. But for a broader, one-stop-shopping fund, the total market index offers maximum diversification within the U.S. equity universe.

Eureka! I could make this work even though Vanguard 500 Fund is yet another fund, but it's close enough to what the Institutional Fund is trying to do for my intents and purposes. I had decision paralysis no more. So this is what I decided to implement in My Early Retirement Journey 2018 Q2:

80% Stocks (3/4 with VINIX, expense ratio, 0.04%; 1/4 with VEXAX, small and mid-cap exposure, expense ratio 0.08%)

20% Bonds (VBTLX - Vanguard Total Bond Market Index Adm; expense ratio: 0.05%)

Current: Fidelity Freedom Fund 2045, expense ratio: 0.75%, managed allocation of 90/10 stock/bond

DISCLAIMER: One of the potential pitfalls with the ‘easy choice/don’t reinvent the wheel’ method is that one person’s idea often gets recycled over and over throughout the blogosphere. I’ve seen that many times in various listicles on myriad subjects outside of personal finance. And of course, there is always the never forgotten pillar that everything on the internet is TRUE. That being said, I do try to look at the background of the bloggers and other posts to see where they get their ideas. Many of them do point to other blogs so I at least have some semblance of point of origin.

Not one FIRE blogger that I follow is a financial analyst. In fact jcollinsnh has a B.A. in English. So I do consider all these things as I make these major financial, potentially life altering decisions. I do do some separate internet searches on things like indexing and Vanguard and its founder to get different perspectives. And I persist, open to the idea that it’s all one big hoax and we could all sink in the same boat but at least I’d have company.

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What Should My Stock Allocation Be on My Early Retirement Journey?

So one of the things keeping me awake was how to properly allocate my stocks on My Early Retirement Journey.

Why is this important?
Investing, yes, has the potential to grow your capital with the magic of compound interest. However, the risk of losing your initial investment is present as well. What I seek to do is grow my money the fastest (which will allow a shorter Journey to Early Retirement) while minimizing the risk of loss.

The conundrum:
The twist with conventional wisdom is it focuses on years available to earn income to make up for any losses and allow the stock market to adjust after a downturn. Early Retirement means I still have physical life left to earn money. So does my risk exposure relate to my actual age (i.e. incoming earning potential measured in years) or the time to my proposed Early Retirement?  I took to the internet and this is what I found:

Thought 1: (source: millenial-revolution.com)

Thought 2: (source: forbes.com)
Rules of thumb, like ‘100 – Your Age' in stocks, are a great place to start.
It had a good run, gaining popularity in the 1970s and 80s as a shorthand for the mean-variance optimization model that came out of Nobel prize-winning modern portfolio theory(MPT) in the 1950s. 

The professional investment world is trending closer to a rule of ‘[120] – Your Age’ in stocks.  Indeed, a look at the three largest target date fund providers – Fidelity, Vanguard and T. Rowe Price– shows that they all hold much closer to ‘125 – Your Age.’ For example, these three target date funds allocate 90% in stocks for a 30-year old, and about 75-85% in stocks for a 50-year old.

**I can attest to this; my target date fund is set to 90% stocks and I am in my 30s.

A recent paper by money manager Research Affiliates makes a strong case that the youngest investors...[are]... best served by a “starter portfolio” of 1/3-1/3-1/3 in stocks, bonds, and “inflation securities” like TIPs and floating rate bonds (ETFs TIP and FLOT are good examples). This creates a portfolio of 33% stocks/67% bonds.

The article concludes with: two rules of thumb can cover the needs of most: a conservative starter portfolio for early-stage investors (like that 1/3-1/3-1/3 portfolio of stocks, bonds and inflation securities) and an updated age-based portfolio like ‘120 – Your Age’ in stocks for the rest.

Thought 3: (source: financialsamurai.com)
Different allocation models that account for aversion to risk, lifestyle choices, and interest in investing.

Example: Survival Allocation Model for those within 10 years of retirement.   

The Verdict:
My current stock allocation was set by the individual institutions based on a traditional retirement age (65+). Thus they are about 90% stocks. I was seduced by the aggressive investing with the hopes that I'd reach my FIRE number faster. However, I have an age in mind more than I have a number in mind. Also because I am a millennial, I tend to want what I want as soon as the thought occurs. I am not convinced that more aggressive retirement will get me out of the workforce before age 40 (6 years from now).  Some say that an 80/20 allocation beats a 100% stock allocation in the long run. In fact, the oft lauded benefits of indexing are based on the fact that you hold on to the investment product for at least 15 years to balance any losses. The links don't cite any credible source, so I'll take the information with a grain of salt. Again, who really knows.  In short, I'd like to leave the workforce sooner than 15 or 20 years, even if only for a sabbatical. Thus I'm positioned to keep my 401k slightly more aggressive than my taxable account since I would be accessing the taxable account faster but less aggressive than is traditional for my age. That's it for now.

So what will I do?
When I first drafted this post about 3 months ago, it was changing by the minute. As I explore more in the FIRE community, I wonder how much of what is out there is true and accurate both in terms of research and what bloggers purport they're actually doing. After my experience just starting the blog, I take the advice with a heapful of salt (not just a grain).  The default at both of my investment institutions is 90% stocks; per internet searches, conventional wisdom and general rules of thumb suggest 70% stock allocation based on my age. I initially thought I would have different allocations across my 3 accounts, but as of this moment, simpler is better because sometimes knowledge fades from the forefront of my mind to the deep recesses.

That being said, I think I will do 80/20 across all accounts with a tentative plan to transition to 60/40 when I reach FIRE.  At least one FIRE blogger has reported this conservative allocation after reaching FIRE (and even before), and their reported mentality on back-up plans and not losing money is aligned with where I am on the psychological side of investing. I'd rather spend less than HAVE to go back to work.  I would rather maintain what I have than risk losing it for greater gains. Caveat: I do leave myself the option to return to work for 1 to 2 years after a 9 or 10 year sabbatical. I have mentally allotted return to work as a back-up plan both to boost savings and to break up the Journey after achieving FIRE. All in all, I don't hate my job; I just want a break...a long break. Again this is all subject to change as I become aware of new information. How did you choose your allocation?

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Financial Update | June 2018 Income and Expenses

So I've been experimenting with lots of different spreadsheets in the last week or so.  I used my June 2018 income and expenses to tryout a few more. It turns out Microsoft Excel has loads of templates to try. It's been really neat to see it visualized in so many ways.

Without further ado, here's a recap of my income and expenses for Jan to Jun 2018.  I don't currently intend to publish these monthly namely because my income and expenses don't fluctuate with any significance month-to-month, but I had so much fun with Excel that I had to share! Plus this marks six-months of my being more intentional with my finances.

Income.
Bonus monthly charts! It took me awhile to figure out how to make the graph I wanted. During those trials, I ended up creating different charts of my income sources this year (Jan to Jun 2018).

 

Click to enlarge.

Notes on income.
For the spring semester, I had a side hustle as an adjunct professor. I dove head first  into FIRE. I don't know that I'd do it again in fall. Am mildly interested in maybe some other way to earn part-time money online.

Refunds are mostly from saving receipts and making a point to return things I don't use (including food).  The lowest month was Jun ($8) and highest was Apr ($100).

Expenses.
I still haven't decided on a good spreadsheet. This data was extracted from a Google Sheets doc that lists all my expenses over way too many categories for Jan to Jun 2018, but I like it enough for now.

 

Notes on expenses.
The first sheet includes the amount I put towards savings each month, most of which is automated so I just count it as an expense. The jump in June was not due to an increase in income, but rather aggregated savings that I had no immediate plans for which was transferred to my investment accounts.

The second sheet is monthly expenses over the first half of the year. To best trend any particular data point, start from the bottom and move up.  Of note, May was a high expenditure month due to helping out a sick family member.  June was unusually low due to a break I got on my rent. Stay tuned for a future post on that! My intention is to trend around $2,500/mon or less.

Savings Rate.
A firm tenet in FIRE is recognizing and increasing your savings rate.  Tracking income minus expenses, here is what the data reveals.

Closing thoughts.
I am pretty pleased with my financial progress thus far. This is my first year of My Early Retirement Journey and the financial focus is simply creating awareness and having some sort of framework or plan for what to do with my money. So far, I believe I'm on the right track! Additionally, it really helps to visualize it all! Thanks to Four Pillar Freedom for the great visualization ideas.  Thanks for stopping by!

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Financial Update | June 2018 Savings and Investment

Hey there! Welcome back to My Early Retirement Journey. In case you're just joining us, here's a little bit about me.  I am a single 30-something, openly Christian, hesitantly immigrant-y, human woman. I love watching TV while eating takeout, and I want to retire early. I currently work as a consultant in a tele-health call center making around $40/hr. I started my professional life in 2015 at the ripe ole age of 31 after a few false starts. I spent 2016 paying off about $10,000 worth of credit card debt. I spent 2017 paying off about $20,000 in private student loans; I still have about $300,000 in federal student loans for which I am currently on an income-based repayment plan for the next 25 years, give or take.  I started really getting into savings and investing late 2017 when I stumbled upon the FIRE (financial independence, retire early) community.  In 2018, I made the decision to try to save for a sabbatical and maybe if all goes well continue the journey to early retirement.  Along this journey, I give all sorts of updates, just like this one.

This is the June 2018 Update of my savings and investments balances, i.e. my personal capital. I don't call it net worth because my massive student loan debt keeps me at a negative net worth and frankly that's discouraging.

I tried my hand at Excel to make a simple bar graph. It took a few hours to remember all the words. I kept getting so many error messages. So if it's been awhile since you tried Excel, don't give up after the first error message! Once you figure out what they're asking for, it only takes about 15 minutes to format.

Let's quickly recall some budget items:

2018 Savings goal: $37,000/yr (2017: no goal)
Monthly savings contributions: $3115/mon

 



 

When you add in my Safety Net Fund + Regular Savings and Checking, the amount is a little more.



 

💜 Yay! I've sort of reached that enviable $100,000 hump.💜 I'm not celebrating yet. I don't really count my checking and savings amount yet. I see that as my safety net fund. Experts recommend 6 months. I went ahead and saved for about 1 year of expenses ($30,000) for a couple reasons. First, it was a default choice because I had that first 6 months in CDs and I didn't want to cash them out when I first started investing in Dec 2017.  Secondly, I have this fantasy of just quitting my job and in case I do, I'd like to have 6 months readily accessible. I mean I probably won't, but sometimes humans do crazy things. Also, both my brokerage account and 401k are using my traditional retirement age of 65 to allocate my funds at a risky 90% in stocks. I keep going back and forth (future scheduled posts), but in short, it makes me feel better to have 1 year's expenses on hand. I know the compound interest lost is causing investment aficionados to gasp in horror, but again, I've only been investing "actively" for about 6 months now.  That's all folks!

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Enron and Madoff and Ponzi! Oh My!: How to Background Check Your Financial Professional

So when I started My Early Retirement Journey, one of the first things I had to reconcile was the fear of letting my money go to a place I didn't understand. Every few years, we hear the stories of Bernie Madoff, or the next Bernie Madoff, or the Enrons or even watch CNBC. CNBC has an entire 13-season-and-counting run of American Greed which chronicles stories of greedy doctors, businesses, and financial advisers and firms. One must wonder, who is going to be next? When will the next Ponzi scheme come tumbling down and who will be affected? Is it going to be someone in the oft touted Vanguard or one of the new robo-advisors popping up...Wealthfront? Betterment? Ellevest?

What can we as consumers do to arm ourselves? Well as far as I know, no one truly knows what anyone is going to do, but the US government does put some safeguards in place to try to keep us and our assets safe.  I did some research and this is what I found.

Who we are as investors?
In 2010, the SEC’s Office of Investor Education and Advocacy asked the Library of Congress’s Federal Research Division to prepare a report on behavioral traits of U.S. investors.  The Library of Congress report identifies nine investing behaviors that can undermine investment performance. These behaviors include: active trading; the disposition effect; focusing on past performance and ignoring fees; familiarity bias; manias and panics; momentum investing; naïve diversification; noise trading; and inadequate diversification.


How to invest wisely?
The SEC recommends you ASK QUESTIONS. Per the SEC, we see too many investors who might have avoided trouble and losses if they had asked basic questions from the start. We encourage you to thoroughly evaluate the background of any financial professional with whom you intend to do business—before you hand over your hard-earned cash. It doesn’t matter if you are a beginner or have been investing for many years, it’s never too early or too late to start asking questions. It’s almost impossible to ask a dumb question about how you are investing your money. Don’t feel intimidated. Remember, it’s your money at stake. You are paying for the assistance of a financial professional. They should be prepared to answer your questions.


How do I do a background check?
If it's someone recommended to you by a friend or family member ask them about their experience with this person. Do they get statements? Are there returns too good to be true? Is it easy to reach the advisor? Does this advisor target only a certain group of people? Are they registered with the state? What training and experience do they have?

If you're in the FIRE world, or use online services, these and others are still questions you can pose. You can search the founder of the investment firm. If your employer has a 401k, the Prospectus that comes with it lists the fund manager. You can verify your broker’s disciplinary history by checking the Central Registration Depository (CRD) or by doing a broker check. Either your state securities regulator or FINRA can provide you with CRD information. Researching investments is part of an investor’s due diligence. Also, you should know that if your financial professional or his or her firm goes out of business or declares bankruptcy, you might not be able to recover your money—even if an arbitrator or a court rules in your favor. Do your research!

Research tools:
Ask and Check - Research Investment Products and Professionals
Using EDGAR - Researching Public Companies
Using EMMA - Researching Municipal Securities and 529 Plans
FINRA Fund Analyzer - The Fund Analyzer offers information and analysis on over 18,000 mutual funds, Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs).  This tool establishes the value of the funds and impact of fees and expenses on your investment and also allows you the ability to look up applicable fees and available discounts for funds.

How to Read a Mutual Fund Prospectus
Part 1 of 3:  Investment Objective, Strategies, and Risks
Part 2 of 3: Fee Table and Performance
Part 3 of 3:  Management, Shareholder Information, and Statement of Additional Information

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What The Heck Does That Mean: A Beginner's Guide to Investment Vocabulary

So I recently did a lesson for my mathematical literacy class (my current side gig) on some basic personal finance topics.  I reviewed with them the Pyramid of Investment Risk and thought I'd share it here for any new investors like myself. I'll admit I had to look up most of the words before I presented the lecture as I am still pretty new on My Early Retirement Journey.

 

(source: Investor Education 2020)

What the heck does all that mean?

What are Futures? A futures contract is a commitment to buy or sell a specific amount of a commodity at a specific future date and price. Futures contracts deal in products ranging from corn, soybeans, wheat and cattle to gold, crude oil, Japanese yen, and U.S. Treasury bonds.

What are Bonds? When investors buy bonds, it means they have loaned money to a company or a governmental entity.

What is a Stock? A stock is an investment product that represents partial ownership of a company or corporation. The stock market represents all the companies that sell their shares to the public. It is the primary place for companies to obtain financing for their operations and for investors to profit on the growth of those companies. There is therefore a close relationship between the stock market and the economy as a whole.

What is a Mutual Fund? A mutual fund invests the pooled money of its shareholders in various types of investments.

What are Exchange Traded Funds? Exchange-traded funds are a cross between mutual fund index funds and stocks. Like index funds, ETFs hold baskets of securities that follow indexes.

Index funds.  What that? These are relatively simple funds that aim to track indexes, or broad baskets, of different securities. Their goal is to match a particular market index such as Standard & Poor’s 500-stock index (S&P 500), which measures the performance of 500 large U.S. companies.

What are securities? Securities allow you to own the underlying asset without taking possession.
For example.. Municipal securities are how government agencies borrow money to finance investments and cash flow needs.

That's all for now, folks! Thanks, come again 😁

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