How To Make Money Off A Stock Tip

Dollabuzz Shows You How to Make Money Off a Stock Tip

Dollabuzz readers what it is what be!? Today we discuss how to make money off a stock tip. Dollabuzz has covered opening a traditional investment account such as a  401k or a Roth IRA. How about taking on a little more risk for the chance at a greater return? Suppose you discover a hot stock tip. How do you capitalize on this information and get paid?

You capitalize by purchasing call options. If you are new to investing through options a good place to start is with an in depth review of options.

There are numerous option strategies but we want to keep this post as simple and short as possible. Therefore, we will focus on one aspect of options (buying “calls”). In this post, Dollabuzz will provide an easy three step overview of how to make money off a stock tip by purchasing call options.

The first step is opening a brokerage account, step two is buying calls, and the final step is locking in your gains by “selling to close.” Let’s see how to make money off a stock tip by walking through an actual trade I made.

What Are Options: A Get Money Overview

Options: A Contact That Gives You Rights

When buying call options you are buying contracts and one contract is equal to 100 shares. This contract gives you a right to purchase shares of stock at a predetermined price (strike price). This right expires at a specific future date (expiration date). For this right, you pay a premium to the seller. As the stock price rises, so does the value of the premium. Money is made when you sell your right for a premium that is higher than what you paid for it. Sounds simple, right?

Two Advantages of Call Options

Two advantages to investing through options are less risk and the power of leverage. Call options are less risky because you can only lose as much as you paid for the premium. Leverage allows you to control a large number of shares on the low. For example, in this trade, I pay a premium of $219 to control 300 shares of stock. If I were to buy 300 shares of stock it would cost me about $2500.

Key Definitions That You Need To Know

Call Options

If you think the share price of a stock will increase you buy call options.

Strike Price

The strike price is simply the price you have the right to purchase the stock. Strike prices higher than the current share price are “out of the money.”

Expiration Date:

The date that the contract expires or becomes worthless.

How to Make Money Off a Stock Tip Step #1: Open a Brokerage Account

There are numerous online options and you will need to complete paperwork acknowledging the risks associated with options trading. About $500-$1,000 investment is needed to start. But to get RICH off of one stock tip you’ll need a few thousand dollars. Remember: Never invest money you can’t afford to lose.

How to Make Money Off a Stock Tip Step 2: Your Call Strategy

Important Information for this Example

  • Date: 9.1.17
  • Stock: NEOS Therapeutics Inc (NEOS)
  • Stock Price at Time of Trade: $8.32
  • Options Purchased: $10 calls expiring on 10.20.17. Please note the $10 strike price is “out of the money.”
  • Premium paid: $219 for 3 contracts (300 shares)

What the hell does all this mean? I just wanna make some money!

Great question! What this trade says is that I think by 10.20.17 the share price of NEOS will be $10 which is a 20% increase. I bought (paid a premium) for the right to control 3 contracts (300 shares) at $0.70 a share for $210 plus $9.00 commission. As the share price increases so does the premium associated with these contracts and this is where money is made.

Initiating the Trade: Learn With Virtual Money

Before investing with real money it would be a Dollabuzz move to practice buying calls online with virtual money. For those new to investing, buying calls can be confusing. Therefore, learning the rules and placing trades with virtual money is highly recommended. Once you get the hang of it, the next step is to execute the trade with real money. Here the steps needed to execute your trade.

  1. Enter ticker symbol
  2. Pull up “options” chain
  3. Look for strike price of out of the money
  4. Select desired strike price
  5. Select “buy to order”
  6. Enter number of contracts
  7. Set price to pay for each contract
  8. Review and hit enter

How to Make Money Off a Stock Tip STEP 3: LOCK IN GAINS

Now that you have a position you really need to monitor it closely. As the stock price increases so will the premium you paid. NEOS is expected to announce positive results around September 15th and closing my position on or around that time is my exit strategy. It is important to determine your exit strategy BEFORE investing. What gain or loss are you willing to accept? That is your strategy.

You Can’t Go Broke Taking Profits

A premium can decrease in value just as quickly as it increases. It is important to monitor your position closely and be ready to lock in your gain. If the trade is not working as planned, you can always “sell to close” and exit your position.

How To Find stock tips

How to find stock tips is a common question we come across. This stock tip came from Seeking Alpha (SA). SA is an investment blog whereby people post their thoughts and ideas on investing. One SA blogger I follow is Bret Jensen and his recent post inspired today’s trade.

How to Make Money Off a Stock Tip: Conclusion

Investing through options involves selecting the right stock and having belief in yourself. Ideally, you need a stock that will go up and go up fast by a specified date. The first step is opening a brokerage account. The second step is buying calls and the final step is locking in your gains by “selling to close”.

There numerous option strategies and the one presented here is a simple beginner strategy. If you are looking for an easy read on investing through options be sure to check out Understanding Options by Michael Sincere. It is a MUST read and a great resource. I used this book to learn how to invest in options and reference this book quite a bit.

Purchase the book here

and for your reading device

 

 

The Money Mindset of Personal Finance Success

Dollabuzz Your Mindset For Personal Finance Success

Personal finance is more than just budgeting, saving, and investing. You need a certain mindset to succeed at the money game. Dollabuzz will show you the mindset you need and how to get there.
Money and personal finance success
A strong mindset is key to personal finance success

I got my mind on my money, my money on my mind….oh hey wassup Dollabuzz readers! As I write this, I am thinking about money, Dollabuzz, and listening to Gin and Juice . Ahhh, the early 90’s when Snoop D-O-Double- G was just a young G.

Anyways, back to the lecture at hand. A STRONG Dollabuzz requires the right mindset and that is why I read Mindset: The Psychology of Success by Dr. Carol Dweck. Dr Dweck will show you how the right mindset will help you get your money right.

Dr. Dweck shares her research about the fixed and growth mindsets and how a simple belief about yourself guides a large part of your life. This post will discuss how these mindsets impact our Dollabuzz. Keep reading and I’ll show you the Dollabuzz mindset and why you should read this book.

Here is what we are covering today:

  • The fixed mindset and its negative impact on your money and personal finance goals
  • The 3 da’s  of personal finance and how they get in the way of your money
  • The growth mindset and how it is key to your personal finance success.

The Psychology of Personal Finance Success: How the Fixed Mindset Kills Your Dollabuzz

The fixed mindset? You’re losin’ me bro. Stay with me. The fixed mindset is that little voice of doubt in our head. We all have that self-doubt in our head and it manifests itself in different ways. For example, maybe you don’t open a 401k or a Roth IRA because you don’t know how and don’t want to look dumb by asking a “stupid” question.

If you have a fixed mindset you may be afraid to try something new and make excuses to protect your confidence. You say things like “I’ll never have money and always be broke” or “only rich people retire.” People with the fixed mindset are always right, don’t like criticism, and try to explain failures away. Using excuses will prevent you from achieving your personal finance goals.

money and personal finance
Keep reading to learn about excuses that get in the way of your money and personal finance goals.

The 3 da’s of Personal Finance: Coulda, Shoulda, and Woulda

At Dollabuzz we refer to common excuses of the fixed mindset as the “3 da’s.” I coulda got his or her phone number. We shoulda went to the after party. The Detroit Lions woulda won the Super Bowl. Yadda, yadda, yadda.

Dr. Dweck explains that fixed mindset people have inflated views of themselves, their abilities, and when they don’t succeed a built in excuse (the three da’s) are right there to make them feel good.

In personal finance  there are numerous da’s. A few common da’s are:

  • We shoulda invested in stocks
  • I shoulda made a budget
  • We woulda paid cash
  • I coulda been a millionaire
  • I shoulda invested in my 401k

Don’t let these excuses kill your Dollabuzz! I hate to point out the obvious but, a GREAT da is Dollabuzz. See what I did? Ta-da!

The Psychology of Success: The Growth Mindset Will Help You Dollabuzz Your Money

A growth mindset will help you reach your money and personal finance goals
A growth mindset will help you reach your money and personal finance goals
The opposite of the fixed mindset is the growth mindset. The growth mindset is the “can do” and “I will” mindset. The growth mindset allows you to succeed when you don’t think you can and allows you to overcome obstacles. This mindset is critical to your personal finance success.
It’s important to know that we all have a fixed mindset. But don’t forget that we can move to the growth mindset as well. Dr. Dweck states that “your efforts, strategies, and the passion for stretching yourself and sticking to it when it’s not going well is the hallmark of the growth mindset.”
Expressions like “work harder and smarter” and “if at first you don’t succeed” are the heart of the growth mindset. Enough of the textbook geek talk and let’s see the growth mindset in real-world action.
My Growth Mindset and Personal Finance Dollabuzz
Last year we purchased a rental house for $45,000. My fixed mindset said what if you can’t find renters or they trash the place? The growth mindset said we’ll make the house nice so it will attract good tenets. Guess what? The house is nice and we have good tenets.
 
My fixed mindset said “you know nothing about blogging” and “no one will read it.” But now, the blog is up and running and I am writing about topics I am passionate about. My fixed mindset gave me every excuse not to do something but my growth mindset took over and allowed me to Dollabuzz.
Why You Should Read Mindset: The Psychology of Success by Dr. Carol Dweck
Dr. Dweck does a great job providing numerous examples of the fixed and growth mindsets. These examples include stories from everyday people to sports and business icons who have failed or succeeded based on their mindsets. Dr. Dweck shows how we move in and out of our mindsets and the importance of knowing when we are in the fixed mindset.
A strong Dollabuzz is not easy and requires us to thrive when challenged and embrace failure (growth mindset). Most people are not born with a Dollabuzz and have to WORK at it through discipline and developing their skills to get their money right.
I highly recommend the book which you can purchase for your Kindle here 
or the book here

 

How to Invest in Residential Real Estate (Part Two)

In part one, Dollabuzz showed you the key risks when it comes to investing in real estate. We also showed you how to vaule a property to so you can make money investing in real estate. In part two, we cover the importance of location.

Welcome back, Dollabuzz readers. Glad you’re here! If you read Part One of this series, you should have a pretty good idea of how to value a property. The next step is to locate the right property. “How to Invest in Residential Real Estate (Part Two)” covers selecting the location, location, location of your investment.

The location of your real estate is critical when investing in (RRE). Location determines the type of tenant you attract and the value of your investment. In this post, we discuss how “smart money,” the local job market, and affordability is determined based on the location of your investment.

Today We Cover The Keys To Location Which Are:
  • Following the smart money
  • The local job market and,
  • Affordability and profitabilty

Follow the Smart Money

My business partner and I wanted a house in Downtown Lansing because we believe this area has upside potential. Dollabuzz is not the only one who thinks this. “Smart money” was planning to invest hundreds of millions in Lansing. At Dollabuzz, we follow the smart money and realized developers planned to invest in hotels, apartments, retail, and restaurants right in that same area.

It’s hard to go wrong if you follow the smart money

According to the Gilespie Group website, “ongoing revitalization projects, delicious cuisine, and diverse nightlife make Lansing the perfect setting.” This sounds like a Dollabuzz upside, and we had to get in on this action.

Look at the Job Market

As we noted, the smart money was investing in Lansing. In addition, Downtown Lansing is home to Lansing Community College, Davenport University, and Cooley Law School. Furthermore, the State of Michigan offices, Sparrow Health System, and Accident Fund are located in Downtown Lansing. These learning institutions and well-paying jobs are perfect for attracting our ideal tenant. But wait… who is the ideal Dollabuzz tenant?

Our ideal tenants are younger professionals, and the location has to match.

For Dollabuzz, our ideal tenants are young professionals. Nothing against college kids or families – we would rent to them as well. In fact, it’s against the law to discriminate against tenants. But every business has their target customer, and our target is the young professional. Downtown Lansing has the jobs, educational opportunities, and nightlife that young professionals tend to be looking for.

A vibrant downtown enhances a property’s location.

Affordability and Profitability

Many investors look to invest in East Lansing, since it’s objectively a very desirable place to live. However, the cost to rent in East Lansing is expensive. A quick internet search shows the average rent for a two-bedroom apartment in East Lansing is $956. By the same token, the median home price in East Lansing is $200,000. For us, investing in East Lansing just wouldn’t be profitable.

Downtown Lansing was our target location. However, we discovered quickly that there was a shortage of nice and affordable houses for sale. As a result, we struggled to find a viable investment property in Downtown Lansing. So now what? Give up? I don’t think so!

Invest Near Downtown

The trend for young professionals is to live near the city, their job, and the local nightlife. The logical conclusion is to find a house that would attract our ideal tenant. However, as we just discussed for East Lansing and Downtown Lansing, those options were not available to us. At this point, we determined that our solution was to look just outside of Downtown Lansing.

We located a house within walking distance of Downtown Lansing and a five-minute drive from East Lansing.  Prior to investing, we drove around the area numerous time to get a feel for the neighborhood. We noticed a few people walking toward Downtown Lansing carrying their laptops, which indicated they were heading towards either work or school. With a walkability score of 56, this area is the second-most walkable zip code in Lansing and appeared to offer solid investment potential.

Looks Can Be Deceiving: “Look Real Close Cuz Strobelights Lie”

Dollabuzz: Look for hidden gems in a prime location.

So we found our house. Yeah, she looked rough – no doubt about it. However, we saw the potential this property offered. The open floor plan, good-sized kitchen, deck(!), and detached garage provided a solid investment foundation. New siding, vinyl flooring, and fresh paint are relatively simple and inexpensive cosmetic fixes. The key to this investment property is its location and the tenants it would attract.

A good-size deck offers plenty of potential, especially to our target demographic. Backyard BBQ, anyone?
BEFORE: An open floor plan along with a deck enhance a property’s location.
AFTER: Peel-and-stick vinyl and fresh paint are easy ways to make a kitchen feel bigger.
New siding and fresh stain are easy cosmetic fixes that will help your property Dollabuzz.

Prior and Current Tenants

The first tenants we had were a young couple. She was going to grad school at Michigan State University and he worked 10 miles away. They wanted a nice house close to East Lansing and the highway. This house fit their needs perfectly! Now, our current tenants wanted to live near Downtown Lansing because there’s plenty to do and the house is near Lansing Community College. In my opinion, it appears we struck location gold – and that’s how you Dollabuzz!

Listen Money Matters and Roofstock.com

At Dollabuzz, we’re always on the lookout for interesting and informative books, blogs, and whatever else we think will help our readers get their money right. A few months ago, I came across Listen Money Matters. I liked what I read and subscribed to their emails. A few weeks ago, I received an email blog about investing in residential real estate through Roofstock.com. Strangely enough, I’d never heard of Roofstock, but I was intrigued.

RAISE THE ROOF!

What I like about Roofstock is the ability to invest in RRE in a different part of the country. Roofstock does A LOT of the work for you and makes investing in RRE as simple as possible. Consequently, I was very excited to learn about Roofstock. I’ve been trying to figure out how to invest in RRE in another part of the county, and Roofstock will allow me to do just that.

If you want to learn more, I strongly encourage you to read Andrew Fiebert’s review of Roofstock.com over at Listen Money Matters, which discusses his experience investing through Roofstock. It’s truly a great read. I read it twice and will use Roofstock if I have trouble finding a good property on my own from now on.

Be on the lookout for Part Three! See you then.

How to Invest in Residential Real Estate (Part One)

Investing in residential real estate is risky but can be very lucrative. Dollabuzz shows you a few key risks and how to value a property so you can make money by investing in residential real estate.

Two story house that is well maintained and rented for a profit
Investing in residential real estate is risky but can be very profitable.
Dollabuzz will get you ready to invest in residential real estate.

How to invest in residential real estate (RRE) is one of the more common questions we’re asked here at Dollabuzz. It seems like 2008 was yesterday and investing in RRE was “risky” – but, in reality, it was a great time to buy. Today though, with a healthy housing market where demand exceeds supply, RRE is once again the “in” investment.

Image result for fire
If you’re looking for how to invest in residential real estate, now’s the time. The housing market is once again on fire!
What We Cover Today
  • Top 3 risks of investing in residential real estate
  • Financing your investment and,
  • How to value a property

The overall housing market is hot, which makes investing in RRE more appealing but also riskier. Since the supply of homes is tight, it can be challenging to find great deals – but that doesn’t mean deals aren’t out there.

It might sound counterintuitive, but rising prices is a good thing. That’s because as RRE becomes more expensive, people are forced to rent while they save money for a house.

This is part one of a three-part series on how I invested in RRE – specifically, the rental house we bought in the spring of 2016. Part one will cover the risks associated with RRE, financing your purchase, and how to value a property. “How To Invest In Residential Real Estate (Part Two)” will discuss the importance of location, and part three will focus on finding your house and how to attract quality tenants.

What Are the Top 3 Risks of Investing in Residential Real Estate?

Before we get too far along, let’s cover a few risks associated with investing in RRE. We can’t cover all the risks associated with investing in RRE in one post, but here are a few of the top risks:

Risk #1: No Liquidity

The biggest risk when investing in residential real estate is lack of liquidity. In other words, your money is “tied up” and you can’t get it out quickly.

The biggest risk when investing in RRE is the lack of liquidity. You can’t sell a house at the click of a button like you can with a stock. According to Murphy’s Law, you will need to sell at the worst possible time and the process will take twice as long. Tied-up money is a risk that can really kill your Dollabuzz.

Risk #2: Bad Tenants

Nothing will kill your Dollabuzz faster than bad tenants. Concerns over deadbeats not paying their rent or trashing the place is the number-one reason I hear about why NOT to invest in RRE. This is why location is so important to you. A good location will help attract good tenants, and good tenants are critical to investing in RRE. Part Two will show you how to find (and keep!) those perfect tenants.

Risk #3: Investing in RRE Costs More Than You Think

A “fixer-upper” ALWAYS costs more than you think it will

A good rule of thumb when estimating the cost of a fixer-upper is that it will cost twice as much and take twice as long as you think it will. Even if you have an inspection, things always pop up. For example, our inspector didn’t notice that some of the pipes in the basement had been removed. As you’re about to see, our inability to keep costs down impacted our Dollabuzz.

Financing Your Investment

Traditional Financing Requires 20% Down

To finance RRE as an investment, you need to put down 20% of the purchase price. This is a very common way that investors purchase RRE, and why not? You only put up 20% while the bank finances the remaining 80%. In addition to requiring lower upfront cash, interest is tax-deductible, so let the bank finance the majority of the purchase.

However, some people will say that borrowing money for RRE is too risky. “Risky for who, exactly?” is my question. If you don’t pay, the bank is on the hook for the remaining balance.

All-Cash Purchase Is Riskier but Simpler

All cash in is much more risky than financing.

For this purchase, we went all-cash for one reason: Simplicity. Since we paid in all cash, no banks were involved, which means a lot less paperwork. No tax returns, pay stubs, or appraisals.

However, all-cash is much riskier. Instead of 20% down, we are 100% down, which ties back to risk number one: lack of liquidity. The only way we can get this money out is to sell the house or wait for the tenants to pay us back each month.

How to Value a Property

Assist to the Wu Tang Clan for helping me out on this one. How do you make a blog about investing in RRE not boring? Why are you asking me? You’re the one writing this post! Talk about CREAM. Cash money. Dolla dolla bills. Investments are valued on how much free cash flow is generated. To quote my man Mike Soo, who’s a real savvy investor, “I love me some free cash flow!” PREACH, Mike!!

Dollabuzz preaches that real estate investing is all about the free cash flow.

There are many ways to value RRE. At Dollabuzz, we focus on the cash flow, yo. Investing in RRE is essentially purchasing the future cash flows generated. The two methods Dollabuzz likes to use are the discounted cash flow analysis (DCF) and the cap rate (CR). Dollabuzz uses those two methods to ensure as much accuracy as possible. What in the world is DCF? Don’t worry, loyal reader – we got you.

DCF: The Value Today of Future Cash Money

It’s all about the cash flow, yo.

This is where things can get confusing, but hang with me and it will make sense. The DCF method simply determines the present value of an investment based on future net cash flows given a discount rate (DR). The projection of future net cash flows requires you to estimate future rental income and operating expenses.

Operating expenses keep the property operating and include property taxes, insurance, utilities, etc. The difference between your rental income and operating expenses is your net cash flow from operations.

Please note: Principal and interest payments are NOT operating expenses.

But What’s “Discount Rate”? My Head Is Buzzin

As we previously noted, DCF requires a DR. The DR is the rate of return you require given the rate of return you could earn in a similar investment at the same level of risk. The DR combined with the projection of all future net cash flows from operations gives you the present value of those cash flows, which is the net present value of the property. For this investment, our goal was a 15% DR. Let’s see how we did.

How Did We Do?

I’ll spare you the details here, but the current projected DR using the DCF is 11.5%, which is 28% below our target return of 15%. Wow that’s a pretty big miss. Waaaaay off. What happened? Risk number three killed our Dollabuzz hard. It cost us a lot more to make the house nice.

But the silver lining: This will allow us to attract quality tenants in the future. Yes, we missed our target return, but not having a nice house would cost us more in the long run. If you have a nice house, tenants are far more likely to treat it nice. Have a dump, and it will be treated as such.

The Biggest Drawback to DCF

DCF relies on future assumptions, which is its biggest drawback. However, I really like the DCF method because it puts a current value on net future cash flows. In other words, the DCF provides a current value (net present value) of future cash flows, which is used to determine what a property is worth. Knowing what a property is worth from a free cash flow perspective allows you to determine what to pay for a property.

Dollabuzz Note: The DCF method requires the use of a net present value calculator. This calculator is very useful and easy to use, and for my readers’ sake we’ll skip the “how to use it” discussion and simply refer to the calculator.

Cap Rate: What Is Cap Rate?

Can It All Be So Simple?

The Cap Rate (CR) method is much simpler than the DCF method, but it may not be as accurate over a long period. However, this is a popular way to measure the value of a potential property versus a similar property.

CR data for a particular location is easy to calculate, or it can be provided by a real estate agent. Compare the CR for the property you want to purchase versus others in the area to determine whether you’re getting a good deal or someone is trying to play with your money.

How to Use Cap Rate

Simply calculate your annual net free cash flow and divide that amount by the value of the property. For example, cash all-in cost us $45,000, and that’s roughly its market value. Our annual net cash flow is $6,200, which is a 13.7% CR and below our target return of 15% but above our DCF return of 11.5%.

Dollabuzz Your RRE Investment

DCF is a measure of the investment’s performance over a time period, while the CR is a measure at a point in time. Since the DCF measures an investment performance over a longer period of time based on operating cash flows, it is an excellent valuation tool, which is why I prefer this method.

Related image
Dollabuzz will show you how to invest in RRE

Location, Location, Location

Now that you have the first step toward understanding how to invest in residential real estate – which is how to value RRE – spend some time experimenting with the DCF calculator, which will allow you to value a property under various assumptions. The next step is to find the right property, and that requires finding the right location. Part two of this series will show you how to find the right location.

The Geeky Nerd Numbers You Need to Know When Investing in Residential Real Estate

Knowing the “numbers” is key to investing in RRE. In this post, I can’t possibly cover every metric used to invest in RRE. I respect my readers too much, because don’t nobody got time for that.

However, after we purchased the house, I came across an excellent resource: a book titled What Every Real Estate Investor Needs to Know About Cash Flow… and 36 Other Key Financial Measures. The author is Frank Gallinelli, and he does an excellent job of explaining how to value a property. This book is a MUST for investors. To order the book on Amazon, click here.

See you in Part Two!

Why You Should Open a Betterment Account

Taking the First Step Toward Wealth with Betterment

Welcome to Dollabuzz! For those just off the bench and new to the game, investing in the stock market can be confusing and intimidating. But don’t worry—it’s actually pretty simple. Here at Dollabuzz, we believe that investing in the stock market for the LONG term is essential. We’re not about get-rich-quick scams here; we’re about building wealth over the long term, which is done by investing through Betterment.

one hundred dollar bills wrapped in a rubber band
Investing for the long haul will allow you to Get.Your.Money.Right

Opening a Betterment account is a great way to get started, no matter how much money you have. Betterment is a low-cost investing service that can get you on the path toward achieving your investing goals. Start your Betterment journey NOW and you’ll be feeling a strong Dollabuzz in no time.

Why I Recommend Betterment

I discovered Betterment when I was 19 years old. I started by putting $100/month into a Roth IRA account. The cost was low, the interface was easy to use, and it had the account types I was looking for. For the first year of my Betterment account, I paid less than a crumpled-up Lincoln in fees.

File:Lincoln on 5 USD bill.jpg
For the first year of my Betterment account, this is how much I paid in fees.

That’s a Dollabuzz right there. This is dirt cheap compared to many other accounts. Their website and mobile app are really simple and easy to use, especially for beginners. Betterment makes it painless to open the account type you want and check up on your investments.

Betterment’s Available Options

Betterment is a straightforward service, and you DO NOT have to hand over bags of cash. At Dollabuzz, we recommend opening an IRA or 401k as soon as you can. The Roth and traditional IRAs have different tax advantages, so you have to find which works best for you. Just remember, in the long-term, every dolla bill adds up!

How Does Betterment Work?

Betterment uses Exchange Traded Funds (ETFs) as their investments vehicle. This includes four bond ETFs and six ETFs that are made up of different stocks. This simplifies your investing portfolio, and you get to decide what percent you’re invested in each. If you’re not sure how aggressive or conservative you should be, Betterment will start you off with their best recommendation. Keepin’ it simple!

How to Join Betterment

Betterment.com is the website, and you’ll find a “Get Started” button right on the homepage. This will get you rolling with the sign-up process and you’ll be asked a few questions. These are designed to give them a better understanding of the kind of investor you are, as well as your risk tolerance.

sign that says investment

After Creating Your Betterment Account

Once you sign in, you’ll connect your checking account in order to transfer funds to your account. Next, you’ll select the type of account you’d like to open; this will vary for everyone depending on their individual situation.

Keep in mind that just because you’re invested in ETFs and not picking individual stocks/bonds, this is still the stock market. Whenever you invest in the stock market, there’s always a chance you could lose some or all of what you have invested. Check back in periodically and adjust your investing strategy as your life and the market changes.

Other Ways to Dollabuzz

I recommend Betterment because it’s an investing service that I use myself—and I have for a long time—but I understand that it’s not right for everyone. There are similar sites (like Wealthfront.com) which are also popular, but I don’t have any money invested there myself. It’s impossible to keep track of all the options out there, so if you know of any that should be mentioned, please send me an email and I’ll check it out!

wealthfront logo
Wealthfront is another investing platform.

Dollabuzz Takeaway

We believe that investing in the stock market for the long-term is essential to a strong Dollabuzz, and historically the stock market has provided a way to build wealth. Will there be bumps in the road? You bet—it’s always been this way, and it won’t stop anytime soon. Some years are better than others, but in the long term, the stock market is a smart way to make money.

Making smart money decisions and having a money plan are the keys to financial success. If you have any other questions about Betterment or any other topics I’ve discussed, I would love to hear from you. Shoot me an email and I’ll respond as soon as possible.

Dollabuzz Update: Good thing you stuck around until the end, because we have something new to share. Ever heard of the stock-trading app Robinhood?! As a special reward, check out the new post on Robinhood and find out why it is the HOLY GRAIL for new investors! Commission-free, of course!