Category Archives: Trading

Short Interest and Short Selling

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Short interest provides investors a sense of the degree to which investors are betting on the decline of company’s stock price.

It’s easy for investors to understand that you can make money after buying shares of a stock when the stock price increases (going long).

Traders can also profit from a declining market by using a strategy called shorting stock.

Short selling is when a trader sells shares of a company they do not own, with the hope that the price will fall. Traders make money from short selling if the price of the stock falls and they lose if it rises.

Shorting a stock first involves borrowing the stock you wish to sell at a market-determined interest rate and then selling the borrowed equities to take advantage of a future market decline.

You profit by selling the borrowed stock at a higher price and subsequently buying it back at a lower price if the stock price falls.

The profit consists of the difference between the price at which the trader sold the stock and the price they buy it back at less any borrowing and transaction costs.

To successfully short sell, you need to identify stocks that are likely to decrease in value. Look for companies with weak financials, negative news, or a downtrend in their stock price.

When short selling, market timing is crucial. You want to enter the trade when the stock price is likely to decrease, and exit before it rebounds. Pay attention to technical indicators and price action to make informed decisions.

Why Short Interest Matters

Short interest is the number of shares that have been sold short but have not yet been covered or closed out.

Short interest is important to track because it can act as an indicator of market sentiment towards a particular stock. An increase in short interest can signal that investors have become more bearish, while a decrease in short interest can signal they have become more bullish.

Source:

  1.  https://www.benzinga.com/insights/short-sellers/24/03/38010258/pypl-analyzing-paypal-holdingss-short-interest
  2. https://www.benzinga.com/money/how-to-short-a-stock

Long-Term Investors vs Day Traders

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Billionaire “Old School” Investors:

1. Carl Icahn
2. Warren Buffett
3. Charlie Munger
4. Howard Marks
5. Nick Sleep

Billionaire Day Traders:

1.
2.
3.
4.
5.

The second list isn’t blank by accident.

For the purposes of this post:

  • Day trading is buying and selling on small price movements in stocks throughout a trading day, often in intervals of seconds or minutes.
  • Old School (Long-term) investing is buying or selling a company’s stock after long periods of holding an investment and being patient for the right price to intrinsic value proposition.

Intro to Stock Options

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“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” ~ Warren Buffett

Options are financial contracts whose values are tied to another underlying asset.

Options trading can be an appealing way to build wealth or manage risk, especially if you’re looking beyond just investing in stocks, bonds, and other assets in your portfolio.

But options trading can be a complex and challenging endeavor. The key to success in options trading is understanding the basics, including knowing what options are and the risks and rewards involved.

Options Basics

Options are contracts giving the purchaser the right to buy or sell a security, like a company stock or exchange-traded fund (ETF), at a fixed price within a specific period of time.

Options holders can buy or sell by a certain date at a set price, while sellers have to deliver the underlying asset. Investors can use options if they think an asset’s price will go up or down or to offset risk elsewhere in their portfolio.

Options are financial derivatives because they’re tied to an underlying asset. Other types of derivatives include futures, swaps, and forwards. Options that exist for futures contracts, such as S&P 500 or oil futures, are also popular among traders and investors.

A stock option typically represents 100 shares of the underlying stock. Stock options are common examples and are tied to shares of a single company. Meanwhile, ETF options give the right to buy or sell shares of an exchange-traded fund.

An option is a contract between the holder and the writer. The holder (buyer of the contract) pays the writer (seller of the contract) a price – the premium – for the right to buy or sell the underlying asset.

Option holders can buy or sell the underlying security by a specific date (called expiration date) at a set price (called the strike price). If the option holder exercises the contract on or before the expiration date, the option writers must deliver the underlying asset.

Many investors get interested in options trading because it can be a way to generate income, speculate on the price movements of securities, as well as a way to hedge against losses. However, with these possibilities, they are downsides to options trading too.

Before diving into the world of options contracts and options trading, it’s essential to understand the benefits and risks of this investment strategy.

Some of the main advantages of options trading are:

  • Options give you the chance to make money whether the market is going up, down, or sideways.
  • Options may be an inexpensive way to participate in the market without tying up as many funds as stock or bond trading requires.
  • Options provide investors with leverage, which can help magnify returns.

Some of the main drawbacks of options are:

  • Options trading is a complex and risky strategy and one that requires a great deal of knowledge and experience to succeed.
  • Options involve a great deal of leverage, which can amplify losses if the trade goes against the trader.
  • Options contracts are not always as liquid as other securities, making them harder to buy and sell.

Options are a complex, risky market and may not be suitable for everyone.

“Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well as firm rules for pulling the trigger – deciding when to buy and sell. Money refers to how you manage your trading capital.” ~ Alexander Elder

References:

  1. https://www.sofi.com/options-trading-101/
  2. https://www.sofi.com/learn/content/how-to-trade-options/

2021 Women and Investing Study | Fidelity Investments

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More women than ever are taking a seat at the investing table, according to Fidelity Investments.

Fidelity Investments’ 2021 Women and Investing Study was conducted “to gather insights into women’s attitudes and behaviors when it comes to managing their finances” and investing for the long term. The study findings show:

  • 67% of women are now investing outside of retirement
  • 50% of women say they are more interested in investing since the start of the pandemic
  • 42% say they now have more to invest since the start of the pandemic

When women do decide to invest, they are realizing positive results and returns. Analysis of more than 5 million Fidelity customers over the last ten years finds that, on average, women tend to outperform their male counterparts by 40 basis points or 0.4%.

While these investing trends by women are encouraging, still only 1/3 of women see themselves as investors, and additionally:

    Only 42% feel confident in their ability to save for the long term, including retirement
    Only 33% feel confident in their ability make investment decisions
    Only 35% feel confident their non-retirement savings are invested appropriately
    Only 14% of women say they know a lot about saving and investing

Overall, women feel less confident when it comes to long-term financial planning and investing to grow their money and build wealth, according to Fidelity Investments.

Women who set financial goals, create a financial plan and take the following additional actions feel more confident in their ability to save for the future and make investment decisions to help their savings grow:

  • Determine current financial status (net worth and cash flow)
  • Pay themselves first, automate their savings and invest consistently a portion of every paycheck
  • Select diversified investments like stocks, bonds, mutual funds or ETFs
  • Take a long-term approach to investing
  • Starting early and track progress regularly
  • Making time to educate themselves about personal finance topics

Bottomline, 64% of women surveyed by Fidelity said that they would like to be more active in their finances, including investment decisions. Not surprisingly, the factors that holds them back include:

  • 70% of women say to invest they would need to know more about picking individual stocks.
  • 65% of women say they’d be more likely to invest, or invest more, if they had clear plan or steps to do so.

It’s never too late for you to get started setting financial goals, creating a financial plan and investing for the long term.

References:

  1. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Price Line vs. Earnings Line

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“A quick way to tell if a stock is overpriced is to compare the price line to the earnings line. If you bought familiar growth companies – such as Shoney’s, The Limited, or Marriott – when the stock price fell well below the earnings line, and sold them when the stock price rose dramatically above it, the chances are you’d do pretty well.” Peter Lynch

As the former head of Fidelity’s flagship Magellan Fund, Peter Lynch produced an annualized rate of return of 29.2% over his 13-year stint at the helm. This track record has arguably placed him as the best mutual fund manager of all time.

In his best-selling book, “One Up On Wall Street,” Lynch revealed a powerful charting tool, called the “Peter Lynch chart,” that greatly simplified his investment decisions. This simple graph plots the stock price against its “earnings line,” a theoretical price equal to 15 times the earnings per share.

When a stock trades well below its earnings line, you should buy, according to Lynch’s theory. When it rises above its earnings line, you should sell. For example, the Wal-Mart Stores (ticker: WMT ) share-price line fell below the Lynch line at about $55 in March 2010. It didn’t climb back over the Lynch line until June 2012, when shares were $67.50. Had you bought the first crossover and sold the second, you would have gained $12.50 a share, or about 23%.

The idea behind this technique is simple. Lynch believe that mature, stable companies are worth roughly 15 times their annual earnings. And over the last 135 years, this has proven to be the mean valuation of the S&P 500 index.

This is known as a the P/E ratio. It is merely the price of the stock divided by its earnings per share. The resulting multiple represents how many times you are paying for last year’s earnings at today’s stock price.

All things being equal, the lower the number the better. Low P/E ratios mean that you are getting more earnings for your investment dollar. And since most large cap stocks eventually trade for at least 15 times earnings, you are more likely to see your shares appreciate as they return to the 15 P/E level.

This simple idea was the basis of Lynch’s investment approach and the reason he created the chart whichconsists of only two lines. The first is the stock price. The second is the hypothetical stock price if it were to trade at a P/E of 15 (the earnings line).

It is a well-known fact among experienced investors that a stock’s price follows its earnings. Over multi-year periods, stock prices move in sync with changing company earnings.

But over the short term, stock prices are unpredictable. This is what creates valuable opportunities for savvy and patience investors.

Furthermore, a good rule of thumb is that the P/E ratio of any fairly valued company will equal its earnings growth rate. A company with a P/E ratio that is half its growth rate is very positive. A company with a P/E ratio that is twice its growth rate is deemed negative.

Thirteen attributes you should investigate for in a stock with the potential for 10x growth, according to Peter Lynch:

  1. The company name is dull or ridiculous.
  2. The company does something dull and boring
  3. The company does something disagreeable or disgusting.
  4. The company is a spin-off like the Baby Bells.
  5. Institutions don’t own it and analysts don’t follow it.
  6. There are negative rumors about it, like Waste Management.
  7. There is something depressing about it such as SRB, which provides burial services.
  8. That it is a company in a no growth industry, since it’s in a non competitive business.
  9. It has a niche such as drug companies.
  10. People have to keep buying the products such as drugs, food and cigarettes.
  11. The company is the user of technology such as Domino’s.
  12. The company insiders are buyers of the stock.
  13. The company is buying back its shares.

Best stocks to avoid is the hottest stock in the hottest industry. Negative growth industries do not attract competitors. Additionally, avoid companies with excessive debt on its balance sheet and invest in companies that have little or no debt.

The debt must always be lower than the equity. If the company has a debt lower than 50% of the equity, it is considered to be in a good financial position. If it is lower than 25%, it’s excellent. When the debt is above 75% of the equity, it is recommended to avoid that company.

References:

  1. https://finance.yahoo.com/news/peter-lynch-earned-29-13-231636799.html
  2. https://tofinancialfreedom.co/en/one-up-on-wall-street-summary-book/
  3. https://www.forbes.com/sites/investor/2021/04/16/lynchs-one-up-on-wall-street-inspired-screening-strategy/

Investing Goals

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“If you avoid the losers, the winners will take care of themselves.”

If you’re new to the world of investing, figuring out how and where to start can be daunting. Investing involves putting your money into an asset with the hope that the asset will grow in value or generate profit over time.

Deciding on which goals, on different kinds of accounts and investments are critical first steps to get you moving in the right direction.

The world of investing can seem vast and overwhelming if you haven’t been a part of it before. But if you take things one step at a time, you can make a plan that’ll get you started on the right path toward your financial goals.

Put your goals first. It’s important to decide what those goals are. Maybe you want to save for retirement.

  • The Joneses are in debt…Make your lifestyle and purchasing decisions based on what you can afford, not what your peers are buying, and instead of coveting thy neighbor’s car, try to feel smug about your fat retirement account, your zero credit card balances, and the car you own free and clear.
  • If it’s good for the planet, it’s usually good for your wallet. Think: small cars, programmable thermostats, compact fluorescent lightbulbs, a garden, refilling your water bottle…the list goes on.

“The biggest mistake you can make is to stop laying the foundation of a generational wealth developing portfolio because it feels temporarily monotonous.”

The primary reason you are investing is to create or preserve wealth, and no one cares more about your personal financial situation — saving for the future, investing for the long term, and accumulating wealth — than you do. So be proactive. Do your research before buying a security or fund, ask questions of your adviser and be prepared to sell any investment at any given time if your reasons for selling so dictate.

Consistency is a key characteristic of successful investors. But as many longtime investors know, it’s hard to stay consistent when volatility whipsaws one’s portfolio, or when losses pile up, or even when one’s portfolio is perceived to trail those of one’s peers. All those factors can drive an investor to abandon their plan and make trades they might one day regret.

  • The secret to successful investing isn’t talent or timing…it’s temperament, according to Jean Chatzky, New York Times Bestselling Author and financial editor at the TODAY Show.. Sad but true–human psychology works against the behaviors that have historically led to good long-term returns.

    • Your goal should be excellence in investing. This means achieving attractive total returns without the commensurate higher risk. Your objective must be to strive for superior investment returns. Your first investment priority is to produce consistency, protect capital, and produce superior performance in bad times.

    It takes superior performance in bad times to prove that those good-time gains were earned through skill, not simply the acceptance of above average risk, according to Howard Marks of Oaktree Capital. Thus, you should place the highest priority on preventing losses. Since, it is should be your overriding belief that, “if you avoid the big losers, the winners will take care of themselves.”

    You can have too much of a good thing

    The power of asset allocation is all about building an intelligent portfolio of stocks, bonds, and other asset classes also means you’ll have less to worry about and more to gain. Asset allocation and asset class mix are a few of the most important factors in determining performance. Look at the size of a company (or its market capitalization) and its geographical market – U.S., developed international or emerging market.

    Financial advisory firm Edward Jones recommends that, when owning individual securities, you consider a diversified portfolio of domestic large-cap and mid-cap stocks. For the more volatile international, emerging-market and small-cap stocks, they favor a mutual fund to help manage risk. Remember, while diversification cannot guarantee a profit or prevent a loss, it can help smooth out performance over time since stocks, bonds, real estate, gold, and other investments move in different directions and are influenced by different economic factors. By holding multiple asset classes, you reduce your risk and increase the return you get per “unit” of risk you take on.

    References:

    1. https://www.forbes.com/sites/bobcarlson/2018/05/01/investing-as-a-business-what-the-tax-code-says/?sh=7b1c9f967bc6
    2. https://www.oaktreecapital.com/about/investment-philosophy
    3. https://investornews.vanguard/getting-started-with-investing/?cmpgn==RIG:OSM:OSMTW:SM_OUT:011921:TXL:VID:2MIN$$:PAQ:INVT:GAD:CSD:PRS:POST:GS:sf241078738&sf241078738=1
    4. https://www.edwardjones.com/market-news-guidance/guidance/stock-investing-benefits.html

    ARK’s Cathie Wood

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    “Cathie Wood is a star stock-picker and founder of ARK Invest, which invests in innovations like self-driving cars and genomics.” Forbes

    Cathie Wood founded ARK Investment Management seven years ago in 2014. One of the biggest secrets to ARK’s investment strategy and noteworthy success, according to Wood, is “the willingness to step in when others are selling a stock for very short-term reasons. We get great opportunities like that.”

    Wood said it “pains me more than anything” to think clients might be panicking and selling at the wrong time.

    Thus, Wood isn’t focused on short-term fluctuations. She takes a long term and bold view. “We have a five-year investment time horizon,” she says. Since, the big ideas blossoming todaywere planted 30 years ago, she says: “We are ready for prime time now.

    Additionally, Wood and her team has been early on many themes—they embraced active management when investing seemed inexorably tied to indexing; they implemented stock-picking in active ETFs while the largest asset managers said it couldn’t be done; and she bought companies that others thought were overpriced, a novelty, or both.

    Investing in transformative technologies that are going to change the world

    Wood’s focus has been on innovative companies with technology to disrupt the way we live. Her portfolios are loaded with stocks that have skyrocketed—for example, Tesla is a big holding in three of her funds. She is an advocate of a future where technology would make everything better, more productive and profitable.

    As Wood and her company’s research frequently remind investors, electrification, the telephone, and the internal combustion engine turned the world upside down a century ago. Now, she believes that five technologies—artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics—are bringing about an equally profound transformation of the economy. These innovations will converge, recombine into things like autonomous taxis and whatnot, and create a perfect economic storm of higher wages, falling prices, and wider profit margins.

    Ark’s ideas start with their research. Wood researched stocks with dogged determination. “Cathie is insatiably curious; she was a voracious consumer of research from all over the Street. She read everything from everyone,” says Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management.

    For example, they state that they take a blank sheet of paper and just say, “What is an autonomous vehicle? What’s the right way to build one? What are the critical variables?” They believe that they will inevitably run into the companies that not only have good answers, but are leading the charge

    She was on a mission to allocate capital to its best use—transformative technologies. Innovation is early-stage growth, and it is typically exponential growth. Companies developing these platforms can generate revenue growth of more than 20% [annually] for years and years.

    Wood looked at places that other investment analysts ignore. She found stocks that sat at the intersection of multiple industries, and weren’t followed by analysts from any side. This, she realized, is where innovation happens.

    Most growth companies have a decay rate, which means the bigger a company gets, the harder it is to grow. Exponential growth often includes network effects and virality, which means the more people joining the network, the more valuable it becomes, and the faster it grows.

    Wood’s believes in transparency when financial firms don’t allow portfolio managers and analysts to use social media to share their research or even gather information. At ARK, Wood created an open-source ecosystem, where the team can share research and collaborate with scientists, engineers, doctors, and other experts. Every Friday morning, she convenes an investment ideas meeting with her analysts and outside experts that’s part business school seminar and part free-form futurist bull session. “Most compliance teams would not be comfortable with that,” Wood says. “From the beginning, ARK actively shares the knowledge they’re generating.

    Conservative philosophy

    The dawning of a high-tech future is central to Wood’s life philosophy. In starting ARK, her goal was “encouraging the new creation,” by investing in “transformative technologies that were going to change the world.” The triumph of innovation also fits well with her free-market views. To a younger generation tempted by socialism, she’s hoping to show that capitalism can still work its magic.

    She’s conservative, both politically and economically. For decades she’s championed green investments. Wood has bemoaned President Joe Biden’s plans to spend big and tax the wealthy, even though many of his proposals are designed to bring the economy closer to her futuristic vision for it, and though higher capital-gains taxes could push more money into tax-efficient funds like hers. She warns that higher taxes on companies and investors will discourage future innovation.

    References:

    1. https://www.barrons.com/articles/arks-cathie-wood-disrupted-investment-management-shes-not-done-yet-51614992508
    2. https://www.bloomberg.com/news/features/2021-05-27/cathie-wood-is-a-believer-from-bitcoin-to-tesla-even-as-arkk-fund-stumbles
    3. https://www.barrons.com/articles/tesla-telehealth-and-the-genomics-revolution-power-ark-funds-51603450802

    Investing is a marathon

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    Investing is a marathon and learning how investing in stocks can help you accumulate wealth is important to your financial

    Long-term investing is a marathon and is the best way, by far, to build wealth that stands the test of time. It’s how you plan for financial freedom, retirement and build a legacy to pass on to your children and grandchildren. Long-term investments require patience and time measured in decades, but have the potential to pay off with high returns.

    Investing is the act of purchasing assets – such as stocks or bonds or real estate – in order to move money from the present to the future. However, the conversion of present cash into future cash is burdened by the following problems:

    • Individuals prefer current consumption over future consumption: delayed gratification is hard for most people and, all things being equal, we would rather have things now than wait for them.
    • Inflation: When the money supply increases, prices also often increase. Consequently, the purchasing power of fiat currency decreases over time.
    • Risk: The future is uncertain, and there is always a chance that future cash delivery may not occur.

    To overcome these problems, investors must be compensated appropriately. This compensation comes in the form of an interest rate, which is determined by a combination of the asset’s risk and liquidity and the expected inflation rate.

    The steps to investing and building wealth involve a series of small decisions that move you along a financial path, one building block at a time over a long period of time. The steps begin with believing that attaining wealth is possible, and a clear intention to start investing and attaining wealth. After all, making your money work for you and accumulating wealth is not a haphazard occurrence, but a deliberate process, journey and destination.

    Once you determine that investing and attaining wealth is a priority, focus your energies on maximizing your income, and saving a portion of it. Investing and building wealth also requires you to make decisions on avoiding potentially destructive forces that erode wealth, such as inflation, taxes and overspending.

    Learning to be mindful of where your money has been going and spending wisely by evaluating whether something is a need or just a want will keep more money in your pocket. The bonus from being mindful will help you stop accumulating more stuff and may teach you to repurpose already owned items.

    “Successful investing and building wealth are about discipline, understanding of your tolerance for risk and, most importantly, about setting realistic financial goals and expectations about market returns,” says Certified Financial Planner Melissa Einberg, a wealth adviser at Forteris Wealth Management.

    Invest in stocks.

    Your first thought regarding investing in stocks and bonds may be that you don’t want to take the risk. Market downturns definitely happen, but being too cautious can also put you at a disadvantage.

    Stocks are an important part of any portfolio because of their long term potential for growth and higher potential returns versus other investments like cash or bonds. For example, from 1926 to 2019, a dollar kept in cash investments would only be worth $22 today; that same dollar invested in small-cap stocks would be worth $25,688 today.

    Stocks can serve as a cornerstone for most portfolios because of their potential for growth. But remember – you need to balance reward with risk. Generally, stocks with higher potential return come with a higher level of risk. Investing in equities involves risks. The value of your shares will fluctuate, and you may lose principal.

    Investing a portion of your savings in stocks may help you reach financial goals with the caveat that money you think you’ll need in three to five years should be in less risky investments. Stock investing should be long-term, understanding your risk tolerance, and how much risk you can afford to take.

    The power of compounding

    Compound interest is what can help you make it to the finish line. Compounding can work to your advantage as a long-term investor. When you reinvest dividends or capital gains, you can earn future returns on that money in addition to the original amount invested.

    Let’s say you purchase $10,000 worth of stock. In the first year, your investment appreciates by 5%, or a gain of $500. If you simply collected the $500 in profit each year for 20 years, you would have accumulated an additional $10,000. However, by allowing your profits to stay invested, a 5% annualized return would grow to $26,533 after 20 years due to the power of compounding.

    Purchasing power protection

    Inflation reduces how much you can buy because the cost of goods and services rises over time. Stocks offer two key weapons in the battle against inflation: growth of principal and rising income. Stocks that increase their dividends on a regular basis give you a pay raise to help balance the higher costs of living over time.

    In addition, stocks that provide growing dividends have historically provided a much greater total return to shareholders, as shown below.

    Invest for the long term.

    Long-term investing is the practice of buying and holding assets for a period of five to ten years or longer. While investing with a long-term view sounds simple enough, sticking to this principle requires discipline. You should buy investments with the intention of owning them through good and bad markets. You should base your investment guidance on a long-term view. For your stock picks, you should typically use a five – to ten-year outlook or longer.

    Long-term investments require patience on your part which is a trade-off for potentially lower risk and/or a higher possible return.

    Market declines can be unnerving. But bull markets historically have lasted much longer and have provided positive returns that offset the declines. Also, market declines often represent a good opportunity to invest. Strategies such as dollar cost averaging and dividend reinvestment can help take the emotion out of your investing decisions.

    No one can or has accurately “time” the market. An investor who missed the 10 best days of the market experienced significantly lower returns than someone who stayed invested during the entire period, including periods of market volatility and corrections. Staying invested with a strategy that aligns with your financial goals is a proven course of action.

    References:

    1. https://www.edwardjones.com/market-news-guidance/guidance/stock-investing-benefits.html
    2. https://smartasset.com/investing/long-term-investment
    3. https://www.bankrate.com/investing/steps-to-building-wealth/
    4. https://www.cnbc.com/2021/02/04/how-we-increased-our-net-worth-by-1-million-in-6-years-and-retired-early.html

    Source: Schwab Center for Financial Research. The data points above illustrate the growth in value of $1.00 invested in various financial instruments on 12/31/1925 through 12/31/2019. Results assume reinvestment of dividends and capital gains; and no taxes or transaction costs. Source for return information: Morningstar, Inc. 

    Financial Literacy: Six Principles of Personal Finance | TD Ameritrade

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    Imagine operating a boat without the basic understanding of nautical rules of the road or even how to operate a boat. Scary thought.

    Here’s another scary circumstance – one that is all too real. Many Americans are making financial decisions with minimal financial knowledge of investing, budgeting, and credit. The TIAA Institute conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.

    Another study, conducted by Pew Research, found that one in four Americans say that they won’t be able to pay their bills on time this month.

    It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Financial success rarely happens by accident; it is typically the outcome of a journey that starts with education.

    Talking about money is one of the most important skills to being a fiscally responsible and a financially literate person. However, 44% of Americans surveyed would rather discuss death, religion or politics than talk about personal finance with a loved one, according to CNBC.

    Why? Two major reasons are embarrassment and fear of conflict, even though the consequences can be grave: 50% of first marriages end in divorce, and financial conflict is often a key contributor. Additionally, it is considered rude to discuss money and wealth.

    The missing component is financial literacy education and training.

    Mastering personal finance requires you to look at your financial situation holistically and come up with a plan for how to manage your money. In this TD Ameritrade video, we’ll look at helpful principles for six personal finance topics:

    1. Budgeting – focus on the big ticket items by cutting cost on the expensive costs such as cars and homes
    2. Saving and investing – be specific about your destination and your plan on achieving your goal and reaching your destination
    3. Debt and Credit – avoid high interest debt and loans on items that will quickly lose value
    4. Reduce taxes – find ways to legally pay less taxes on the income you earn,
    5. Avoid insurance for expenses you can pay out of pocket – purpose of insurance is to protect you in unfortunate scenarios.  60% of all bankruptcy is related to medical expenses
    6. Investing for retirement. – don’t just save for retirement, invest for retirement.

    Make high impact adjustments to your finances to improve your financial future.

    References:

    1. https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html
    2. https://www.tiaainstitute.org/publication/financial-well-being-and-literacy-midst-pandemic
    3. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services

    Option Investing 101 | Fidelity

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    From Fidelity Investments

    Learn the fundamentals of options trading. This introduction to trading option contracts is all about getting to know the basics of options investing and trading; learning the key terms and concepts essential for a new or novice options trader.

    Put/Call Ratio

    High put/call (P/C) levels are a sign of fear (bullish from a contrarian view), while low P/C levels are a sign of complacency (bearish from a contrarian view). The trend of P/Cs is more important than absolute levels. When the intermediate- to longer-term trend of P/Cs is lower, it is bullish for stocks. When the trend is higher, it is bearish for stocks from an intermediate-/longer-term basis.