Instractor’s post:
“Dollar cost averaging is a popular method of investing in mutual funds in which a person invests a fixed-dollar amount at regular intervals, regardless of the market price of the shares. An investor who uses dollar cost averaging is ultimately buying more shares when the price is low and fewer shares when the price is high. Dollar cost averaging lessens the risk of investing a significant amount of money at the wrong time and is especially appropriate for long-term investors, such as those investing for retirement.”
There is a great article that talks about building a retirement fund with dollar-cost averaging.
Kevin O’Leary: This is the biggest money mistake people make (and what to do instead)
And “the way to invest is to take $100 a week and put it to work,” O’Leary says.
To get started, O’Leary recommends using an investing app.
“There’s all kinds of apps out there that help you do it right on your phone. The one that I got involved in, and I’ve heavily invested in, is called Beanstox,” he said. Beanstox allows users to invest small amounts of money – even a few dollars – to buy fractional shares (Links to an external site.) of stocks. (There is a subscription cost of $5 per month.) There are also other similar apps (Links to an external site.), like the popular Robinhood. And there are robo-advisors (Links to an external site.) for beginners that provide an automated investment portfolio, like Betterment, Fidelity Go and Vanguard, also for a fee.
O’Leary recommends investing the $100 into a “diversified ETF, and let the market do its thing.” (O’Leary is chairman of his own ETF company, O’Shares ETF Investment.)
An ETF, or exchange-traded fund (Links to an external site.), is a type of security that tracks an index, like the S&P 500, for example. They are “considered a lower-risk investment because of the increased diversification by holding multiple stocks or other securities,” CNBC recently reported (Links to an external site.). “Some also offer full transparency by publishing their holdings each day… [and] are typically low cost.” (Like any stock market investment, there are risks (Links to an external site.) attached to ETF investing.)
If you invest $100 a week, “by the time you retire (Links to an external site.), in your mid 60s, you should have about $1.2 million sitting there,” O’Leary estimates.
Of course, the amount you have in your 60s depends on when you start investing. If you earn a 9% rate of return, which is the average annualized total return for the S&P 500 index (Links to an external site.) over the last 90 years or so, it would take 35 years to reach about $1.17 million (Links to an external site.). However, if you earned a more modest 6% rate of return, it would take about 46 years of investing $100 a week to reach about $1.21 million (Links to an external site.). Keep in mind that these numbers don’t account for variables that can affect wealth over several decades, from windfalls and emergencies to rises or dips in the market, and most people diversify their retirement portfolio.
“I’m big on this financial literacy. We teach everybody everything in high school, [but] we don’t teach them how to invest,” O’Leary says.
“That’s the big mistake [people] make – they don’t invest for their future.”
https://www.cnbc.com/2020/07/02/kevin-oleary-big-money-mistake-people-make-and-what-to-do-instead.html (Links to an external site.)
What do you think about this advice of saving and investing $100 a week in an S&P 500 ETF? Do you think it is doable for most families? If investing is taught in high school can we have more people save and invest for their retirement?
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Instructor’s post:
There was an article in WSJ in Sept last year that mentioned that small, inexperienced traders are piling into options, which are a cheap way to hit the jackpot if they know what they’re doing. If they don’t, losses can accumulate quickly.
“Are You an Investor or a Gambler? The Stock Market Knows”
https://www.wsj.com/articles/are-you-an-investor-or-a-gambler-thestock-market-knows-11599836443?st=een592y1gpi6fbe
“In late August, a record 62% of premiums paid for options initiating bets on rising stock prices came from people buying no more than 10 contracts. (The long-term average is 34%.) Nearly all such small-fry are inexperienced retail traders, says Jason Goepfert of Sundial Capital Research in Minneapolis, which tracks market sentiment (Links to an external site.).”
As experienced gamblers understand, it’s vital to know what kind of game you’re playing. Some forms of gambling—blackjack and poker are good examples—involve large amounts of skill alongside luck. Others, like the lottery (Links to an external site.)or slot machines or roulette, depend almost entirely (Links to an external site.)on luck.
Trading options involves lots of skill if you know what you’re doing—and nothing but luck if you don’t.”
What are your thoughts on the new inexperienced retail traders getting into options trading? Will they all end up with massive losses that can wreck their life.
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Thank You
