Learn more about the challenge here. Missed some of the challenge? You can view them here.
Day 1: Why Invest?
Day 2: Anatomy of a Stock
Day 3: Watch What? Watch Lists
This training/challenge is for educational and informational purposes only. These materials do not constitute a recommendation to engage in any particular securities transactions.
Investment products are: Not FDIC insured | Not guaranteed by the bank | May lose value
Week 1: Stock Basics
This week’s goal is to introduce you to stocks and help you build a foundation for investing in the stock market. This is a great place to start if you are a beginning investor or would like a refresher if you have already started on your investing journey.
If you had a choice, would you choose to take $1 million, today or a penny that will double every day for the next 30 days? Most would take the $1 million and run. However, if you took the penny that doubled for 30 days, then you would walk away with a cool $5,368,709.12. Unbelievable, right? Well, that’s the power of compounding. The chart below, shows how that penny goes to work with compound interest.
Compound Interest is interest that is calculated on your initial investment AND any interest you have earned in previous periods. Compounding will make your money grow at a faster rate than if it was earning simple interest (interest that is only calculated on your initial investment). Simply put, it is interest on interest or as I like to say, “money on top of money”. With stocks, your funds are able to work for you while you are asleep or busy with life using this nearly magical concept known as compound interest. The more money you have compounding, the more magic gets applied, and the faster your money grows.
Day 4 – Earning Interest: Compounding
Did you know that 59 percent of women guess how much they will need and don’t even consider the interest rate needed to reach a financial goal, such as retirement? Looking at the amount we need to save per month, pay period, or every year helps you to begin to put a plan in place. Your goal should be to find the highest possible interest rate, while minimizing risk, to help you reach your goals. What better way than to do that by investing in a company that has been around for a long time with a stock that has a proven track record? With an investor’s mindset, you need to find investments that will help you meet your financial goals.
With stocks, you can take advantage of rates of return that may allow you to reduce the amount you need to save per month and/or reduce the amount of time it takes to reach your goal. Doesn’t that sound great! This allows you to take the pressure off of only focusing on working for the money, but to shift your thinking (and actions) to finding stocks that will provide you with the rate of return you need for your money to work for you.
Today’s Investing Activity: Select a goal and a stock from your watch list to determine how much you need to save per month. Select another goal and do the same thing, except determine the amount of time it will take to reach your goal.
Use my worksheet ==> “Compound Interest-Wksht“ to help you with today’s activity. Feel free to take a screen shot of your worksheet and share with the group or leave a comment with your results.
STEP 1 – Locate Prior Year’s Stock Performance
Select one of your stocks from your watch list to use for prior year’s performance. If you are using the Yahoo! Finance app, then follow these steps:
- Enter the ticker symbol
- Under the chart, select “1Y”
- Turn your phone sideways to “Landscape” view
- In the lower right-hand corner select the percentage symbol
- Roll your finger across the blue line until it reads “Dec 30 2016”
- Write the percentage down on your worksheet
STEP 2 – Select a goal and determine the savings rate or time to goal
Select one of your goals and write the information on the worksheet or on paper. Use the calculators at MSN Money (Click Here ==> MSN Money ) to help you determine the monthly SAVINGS GOAL or TIME TO REACH GOAL.
- Select a stock from your watch list and find out the interest it earned last year
- Select one of your goals and use the MSN Money calculators to determine your monthly savings rate
- Repeat for another goal to determine the amount of time to reach your goal
- Share a screenshot of your worksheet in The Stocks & Stilettos Society or let us know in the comments below
Today’s activity focuses on understanding how much you need to save and the power of stocks to help your money grow using compound interest. This helps you to identify stocks that may carry a little more risk than you may be accustomed to, but that allows your money to do the heavy lifting to meet your financial objectives. Although past performance is not an indication of how a stock will perform in the future, using past performance gives us a little insight into how well (or bad) a stock price has grown (or not grown). At the end of the day, it’s all about telling your money what to do and how hard to go to work for you using the power of compound interest.
Tomorrow: Day 5 – Account Elevation: Dividends
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