The Dow Jones Industrial Average

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There are 30 Dow Jones stocks designed to serve as a bellwether for the general U.S. stock market.

Founded in 1896 with 12 stocks, the Dow Jones Industrial Average is one of the oldest stock market indexes and one of the most popular. It is designed to serve as a bellwether for the general U.S. stock market and an indictor of the overall U.S. economy. It is widely-recognized stock market indices. It measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the  New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy.

The index changes when one or more components experience financial distress that renders it a less important company in its sector when there is a significant shift in the economy that needs to be reflected in the composition.

Recent changes that occurred include:

  • March 2015, Apple replaced AT&T
  • September 2017, DowDuPont replaced DuPont. (Following the merger of Dow Chemical Company and DuPont)
  • July 2018, Wallgreens Boots Alliance Replaced General Electric

Other major stock indexes include the technology-heavy Nasdaq composite and the S&P 500 index — an index of the 500 largest companies in the United States.

The stock market historically performs similarly to the business cycle of the economy. A bear market (prices decrease 20% or more) occurs during a recession and a bull market (prices increase) during an expansion.

Business Cycle Phases.

The business cycle is the natural rise and fall of economic growth that occurs over time. The business cycle goes through four major phases: expansion, peak, contraction, and trough. The cycle is a useful tool for analyzing the economy.

References:

  1. https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/dow-jones-industrial-average-djia/
  2. https://www.thebalance.com/dow-jones-closing-history-top-highs-and-lows-since-1929-3306174
  3. https://www.thebalance.com/what-is-the-business-cycle-3305912

The Biggest Mistakes Individual Investors Make

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“The public’s careful when they buy a house, when they buy a refrigerator, when they buy a car. They’ll work hours to save a hundred dollars on a roundtrip air ticket. They’ll put $5,000 or $10,000 on some zany idea they heard on the bus. That’s gambling. That’s not investing. That’s not research. That’s just total speculation.” Peter Lynch

For the 13 years, Peter Lynch ran Fidelity’s Magellan® Fund (1977–1990). During his tenure, he earned a reputation as a top performer, increasing assets under management from $18 million to $14 billion. He beat the S&P 500 in all but two of those years. He averaged annual returns of 29% which means that $1 grew to more than $27.

Additionally, Lynch has authored several top-selling books on investing, including One Up on Wall Street and Beating the Street. He has a plain-spoken manner and offers wisdom on investing that can help you become a better investor.

To become a successful investor, you really need to “have faith that 10 years, 20 years, 30 years from now common stocks are the place to be”, according to Lynch. “If you believe in that, you should have some money in equity funds.”

Yet, “there will still be declines”, Lynch says. “It might be tomorrow. It might be a year from now. Who knows when it’s going to happen? The question is: Are you ready—do you have the stomach for this?”

Long term, the stock market has been a very good place for investors to employ their money and capital. But whether the market will be 30% higher or lower in 2 years from now…nobody knows. “But more people have lost money waiting for corrections and anticipating corrections than in the actual corrections”, according to Lynch. “I mean, trying to predict market highs and lows is not productive.”

“In the stock market, the most important organ is the stomach. It’s not the brain.” Peter Lynch

Theoretically, in Lynch’s opinion, the individual investor has an edge versus the professional in finding winning companies (“10-baggers”) that will go up 4- or 10- or 20-fold. They have the opportunity to see breakthroughs, company’s fundamentals get better, and analyze companies way ahead of most people. That’s an edge and you need an edge on something to find the hidden gems.

“The problem with most individual investors is people have so many biases. They won’t look at a railroad, an oil company, a steel company. They’re only going to look at companies growing 40% a year. They won’t look at turnarounds. Or companies with unions.” Thus, individual investors miss great opportunities in overlooked industries or unjustly beaten down companies to chase hot growth stocks.

“But my system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30.” Peter Lynch

“You have to really be agnostic” to pick winners and to invest in a company poised for a rebound, according to Lynch.

“Stocks aren’t lottery tickets. Behind every stock is a company. If the company does well, over time the stocks do well.” Peter Lynch

Peter Lynch’s eight simple investing principles for long term investors are:

  1. Know what you own – Few individual investors actually do their research. And, almost every investor is guilty of jumping into a stock they know very little about.
  2. It’s futile to predict the economy and interest rates (so don’t waste time trying) – The U.S. economy is an extraordinarily complex system. Trying to time the market is futile. Set up a financial plan that allocates your assets based on your risk tolerance, so that you can sleep at night.
  3. You have plenty of time to identify and recognize exceptional companies – You don’t need to immediately jump into the hot stock. There’s plenty of time to do your research first.
  4. Avoid long shots – Lynch states that he was 0-for-25 in investing in companies that had no revenue but a great story. Make sure the risk-reward trade-off on an unproven company is worth it.
  5. Good management is very important; good businesses matter more – “Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.”
  6. Be flexible and humble, and learn from mistakes – “In this business, if you’re good, you’re right six times out of 10. You’re never going to be right nine times out of 10.” You’re going to be wrong. Diversification and the ability to honestly analyze your mistakes are your best tools to minimize the damage.
  7. Before you make a purchase, you should be able to explain why you’re buying – You should be able to explain your thesis in three sentences or less. And in terms an 11-year-old could understand. Once this simply stated thesis starts breaking down, it’s time to sell.
  8. There’s always something to worry about. – There are plenty of world events for investors to fear, but past investors have survived a Great Depression, 911 terrorist attack, two world wars, an oil crisis, 2007 financial crisis, and double-digit inflation. Always remember, if your worst fears come true, there’ll be a heck of a lot more to worry about than some stock market losses.

Finally, in the words of Peter Lynch…”You can lose money in the short term, but you need the long term to make money.”

References:

  1. https://investinganswers.com/articles/51-peter-lynch-quotes-empower-your-investing
  2. https://www.fidelity.com/viewpoints/investing-ideas/peter-lynch-investment-strategy
  3. https://www.fool.com/investing/general/2010/05/21/how-peter-lynch-destroyed-the-market.aspx
  4. https://www.fidelity.com/viewpoints/investing-ideas/peter-lynch-investment-strategy

Emotional Well-Being and Happiness

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“Happiness is not something ready made. It comes from your own actions.” Dalai Lama

Emotional well-being is defined as the ability to successfully handle life’s stresses, adapt to difficult times, and thrive. Emotional well-being is also good for your overall health.

Studies have consistently shown that emotional well and happiest people are those who seek meaning and purpose, practice gratitude, and build strong close relationships, as opposed to seeking immediate gratification or pleasure, states Tchiki Davis, Ph.D., Founder, Berkeley Well-Being Institute, and well-being expert. To find fulfillment, you must uncover your true hopes, ambitions, dreams and ideas, then make your actions match these ideals.

Yet, no matter how perfectly you conduct your life, you won’t always be joyful and peaceful. The happiest and emotionally well individuals will experience stormy and uncertain periods.

Happiness and Emotional Wellness allows us to thrive, solve the problems we confront in our lives and maintain a strong sense of hope.

What determines happiness is due to personality and thoughts and behaviors that can be changed. Thus, you can learn how to be happy — or at least happier.

Although you may have thought, as many people do, that happiness comes from being born wealthy or beautiful or living a stress-free life, the reality is that people who have wealth, beauty or less stress are not happier on average than those who don’t enjoy those things.

People who are happy seem to intuitively know that their happiness is the sum of their life choices. They know that choices, thoughts and actions can influence their level of happiness. You can enhance your happiness by:

  • Investing in relationships – Surround yourself with happy people. Being around people who are content buoys your own mood. And by being happy yourself, you give something back to those around you.
  • Expressing gratitude – Gratitude is more than saying thank you. It’s a sense of wonder, appreciation and, yes, thankfulness for life. Think about what you’re grateful for before you go to sleep and when you wake up in the morning.
  • Cultivating optimism – Develop the habit of seeing the positive side of things. Remember that what is right about you almost always is more than what is wrong.
  • Finding your purpose – People who strive to meet a goal or fulfill a mission are happier than those who don’t have such aspirations. Having a goal provides a sense of purpose, bolsters self-esteem and brings people together. Research studies suggest that relationships provide the strongest meaning and purpose to your life. So cultivate meaningful relationships.
  • Living in the moment – Don’t postpone joy waiting for a day when your life is less busy or less stressful. That day may never come. Instead, look for opportunities to savor the small pleasures of everyday life. Focus on the positives in the present moment, instead of dwelling on the past or worrying about the future.

Spending time with supportive friends or family, cultivating a grateful attitude and an optimistic outlook, focusing on your purpose, and living in the present can help you take steps toward being happier.

Additionally, practicing  gratitude is a great way to boost emotional wellness. First, it feels good because we feel happier to have good things in our lives. Second, it helps improve our relationships when we share our gratitude with others. They see that we value them and it makes our relationships stronger. This makes gratitude a double whammy for our emotional wellness. Start by writing a gratitude list or gratitude notes to people who you are grateful for.

Good friends are good for your health.

It’s never too late to build new friendships or reconnect with old friends. Investing time in making friends and strengthening your friendships can pay off in better health and a brighter outlook for years to come.

Developing and maintaining healthy friendships involves give-and-take. Sometimes you’re the one giving support, and other times you’re on the receiving end. Letting friends know you care about them and appreciate them can help strengthen your bond. It’s as important for you to be a good friend as it is to surround yourself with good friends.

Friends play a significant role in promoting your overall health.

Friends can help you celebrate good times and provide support during bad times. Friends prevent loneliness and give you a chance to offer needed companionship, too. Friends can also:

  • Increase your sense of belonging and purpose
  • Boost your happiness and reduce your stress
  • Improve your self-confidence and self-worth
  • Help you cope with traumas, such as divorce, serious illness, job loss or the death of a loved one
  • Encourage you to change or avoid unhealthy lifestyle habits, such as excessive drinking or lack of exercise

Friends play a significant role in promoting your overall health. Adults with strong social support have a reduced risk of many significant health problems, including depression, high blood pressure and an unhealthy body mass index (BMI), according to Mayo Clinic. Studies have even found that older adults with a rich social life are likely to live longer than their peers with fewer connections.

References:

  1. https://www.psychalive.org/the-secret-to-happiness-and-well-being/
  2. https://www.berkeleywellbeing.com/emotional-wellness.html
  3. https://www.mayoclinic.org/healthy-lifestyle/adult-health/in-depth/friendships/art-20044860
  4. https://www.nih.gov/health-information/emotional-wellness-toolkit

The Psychology Behind Your Worst Investment Decisions | Kiplinger Magazine

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“When it comes to investing, we have met the enemy, and it’s us.” Kiplinger Magazine

Excited by profit and terrified of loss, we let our emotions and minds trick us into making terrible investing decisions, writes Katherine Reynolds Lewis of Kiplinger Magazine.

Most individual investors allow their emotions to dictate their investment decisions. Effectively, there are two types of emotional reactions the average investor can experience:

Fear of Missing Out (FOMO). These investors will chase stocks that appear to be doing well, for fear of missing out on making money. This leads to speculation without regard for the underlying investment strategy. Investors can’t afford to get caught up in the “next big craze,” or they might be left holding valueless stocks when the craze subsides.

  • Fear of Missing Out (FOMO) can lead to speculative decision-making in emerging areas that are not yet established.
  • Fear of Losing Everything (FOLE) is a more powerful emotion that comes from the fear that they will lose all of their investment.

Acording to a 2021 Dalbar study of investor behavior, Dalbar found that individual fund investors consistently underperformed the market over the 20 years ending Dec. 31, 2020, generating a 5.96% average annualized return compared with 7.43% for the S&P 500 and 8.29% for the Global Equity Index 100.

“As humans, we’re wired to act opposite to our interests,” says Sunit Bhalla, a certified financial planner in Fort Collins, Colo. “We should be selling high and buying low, but our mind is telling us to buy when things are high and sell when they’re going down. It’s the classic fear-versus- greed fight we have in our brains.”

Avoiding these seven “emotional and behaviorial” investing traps will allow you to make rational investments.

  1. Fear of Missing Out – Like sheep, investors often take their cues from other investors and sometimes follow one another right over a market cliff. This herd mentality stems from a fear of missing out.  The remedy: By the time you invest in whatever is trending, it’s too late because professional investors trade the instant that news breaks. Individual investors should buy and sell based on the fundamentals of an investment, not the hype.
  2. Overconfidence – Some investors tend to overestimate their abilities. They believe they know better than everyone else about what the market is going to do next, says Aradhana Kejriwal, chartered financial analyst and founder of Practical Investment Consulting in Atlanta. “We want to believe we know the future. Our brains crave certainty.” The remedy: To combat overconfidence, build in a delay before you buy or sell an investment so that the decision is made rationally.
  3. Living in an Echo Chamber – Overconfidence sometimes goes hand in hand with confirmation bias, which is the tendency to seek out only information that confirms our beliefs. If we think an asset holds promise for riches, news about people making money sticks in our minds more than negative news, which we tend to dismiss. The remedy: To counteract this bias, actively seek out information that contradicts your thesis.
  4. Loss Aversion – Our brains feel pain more strongly than they experience pleasure. As a result, we tend to act more irrationally to avoid losses than we do to pursue gains. The remedy: Stock market losses, however, are inevitable.If seeing the losses pile up in a down market is too hard for you, simply don’t look. Have faith in your long-term investing strategy, and check your portfolio less often.
  5. No Patience for Sitting Idly By – As humans, we’re wired for action. That compulsion to act is known as action bias, and it’s one reason individual investors can’t outperform the market — we tend to trade too often. Doing so not only incurs trading fees and commissions, which eat into returns, but more often than not, we realize losses and miss out on potential gains. The remedy: Investors need to play the long game. Resist trading just for the sake of making a decision, and just buy and hold instead.
  6. Gambler’s Fallacy – “This is the tendency to overweight the probability of an event because it hasn’t recently occurred,” says Vicki Bogan, associate professor at Cornell University. Over time, the probability of equities having an up year or a down year is about the same, regardless of the previous year’s performance. That’s true for individual stocks as well. The remedy: When stocks go down, don’t just assume they’ll come back up. “You should be doing some analysis to see what’s going on,” Bogan says.
  7. Recency Bias – Past performance is no guarantee of future results. Yet, our minds tell us something different. “Most people think what has happened recently will continue to happen,” Bhalla says. It’s why investors will plow more money into a soaring stock market, when in fact they should be selling at least some of those appreciated shares. And if markets plummet, our brains tell us to run for the exits instead of buying when share prices are down.The remedy: You can combat this impulse by creating a solid, balanced portfolio and rebalancing it every six  months. That way, you sell the assets that have climbed and buy the ones that have fallen. “It forces us to act opposite to what our minds are telling us,” he says.

It is wise to always keep in mind that the market is volatile as a result of investors’ emotions and behaviors, and thus does not move logically.

References:

  1. https://www.kiplinger.com/investing/603153/the-psychology-behind-your-worst-investment-decisions

by: Katherine Reynolds Lewis – July 22, 2021

Ideal Team Player by Patrick Lencioni

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“The kind of people that all teams need are people who are humble, hungry, and smart: humble being little ego, focusing more on their teammates than on themselves. Hungry, meaning they have a strong work ethic, are determined to get things done, and contribute any way they can. Smart, meaning not intellectually smart but inner personally smart.”  Patrick Lencioni

Patrick Lencioni thinks it is time to change the way people prepare for success. Drawing from his book, The Ideal Team Player, Lencioni makes the compelling case that the key to success in an increasingly team-oriented world are Three Simple Virtues:

  1. Humility – think about others before themselves…putting others before yourselves.
  2. Hunger – need a innate sense of hunger to get things done.
  3. Smart – high emotional intelligence…how we use our smarts to get the best out of others (people smarts).

Whether you’re a senior executive or a high school coach, focusing on these deceptively simple virtues can radically improve your personal and professional effectiveness and fulfillment.

The Concept

An ideal team player embodies three virtues: humility, hunger and people smarts. The power this combination yields drastically accelerates and improves the process of building high-performing teams.

  • HUMBLE — Ideal team players are humble. They lack excessive ego or concerns about status. They are quick to point out the contributions of others and slow to seek recognition for their own. They share credit, emphasize team over self, and define success collectively rather than individually.
  • HUNGRY — Ideal team players are hungry. They are always looking for more—more things to do, more to learn, more responsibility. Hungry people rarely have to be pushed by a manager to work harder because they are self-motivated and diligent. They are constantly thinking about the next step and the next opportunity.
  • SMART — Ideal team players are smart. They are emotionally intelligent and have common sense about people. They tend to know what is happening in a group situation and how to effectively deal with others. They have good judgment and intuition around the subtleties of group dynamics and the impact of their words and actions.

See the source image

What makes this model so powerful and unique is the required combination of all three attributes together, according to Lencioni. If even one attribute is missing in a team member, teamwork becomes significantly more difficult and sometimes even impossible.

References:

  1. https://www.tablegroup.com/product/ideal-team-player/
  2. https://de7pikzj4hvyk.cloudfront.net/wp-content/uploads/2020/12/14171138/Ideal-Team-Player-Model-and-Summary.pdf
  3. https://www.tablegroup.com/18-how-dysfunctional-is-your-team/

Patrick Lencioni is founder and president of the Table Group, a firm dedicated to making work more fulfilling by making organizations healthier.

Intermittent Fasting

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Research shows that intermittent fasting is a way to manage your weight and prevent several forms of chronic diseases.

Scientific studies are showing that intermittent fasting may help reverse chronic unhealthy trends of obesity, type 2 diabetes, heart disease and other illnesses.

Intermittent fasting is all about when you eat.

With intermittent fasting, you only eat during a specific time. Fasting for a certain number of hours each day or eating just one meal a couple days a week, can help your body burn fat. And scientific evidence points to some health benefits, as well.

Intermittent fasting is based on choosing regular time periods to eat and fast. For instance, you eat only during an eight-hour period each day and fast for the remaining sixteen hours. Or you might choose to eat only one meal a day two days a week.

After hours without food, the body exhausts its sugar stores and starts burning fat. This is referred to as metabolic switching.

Intermittent fasting works by prolonging the period when your body has burned through the glycemic calories consumed from your last meal and begins burning fat. Glycemic is basically the presence of glucose (or sugar) in your blood.

Intermittent Fasting Benefits

Research shows that the intermittent fasting periods do more than burn fat, explains Mark Mattson, Ph.D., Johns Hopkins neuroscientist, who has studied intermittent fasting for 25 years. “When changes occur with this metabolic switch, it affects the body and brain.”

One of Mattson’s studies published in the New England Journal of Medicine revealed data about a range of health benefits associated with the practice. These include a longer life, a leaner body and a sharper mind.

“Many things happen during intermittent fasting that can protect organs against chronic diseases like type 2 diabetes, heart disease, age-related neurodegenerative disorders, even inflammatory bowel disease and many cancers,” he says.

Here are some intermittent fasting benefits research has revealed so far:

  • Thinking and memory. Studies discovered that intermittent fasting boosts working memory in animals and verbal memory in adult humans.
  • Heart health. Intermittent fasting improved blood pressure and resting heart rates as well as other heart-related measurements.
  • Physical performance. Young men who fasted for 16 hours showed fat loss while maintaining muscle mass. Mice who were fed on alternate days showed better endurance in running.
  • Diabetes and obesity. In animal studies, intermittent fasting prevented obesity. And in six brief studies, obese adult humans lost weight through intermittent fasting.
  • Tissue health. In animals, intermittent fasting reduced tissue damage in surgery and improved results.

Autophagy and Anti-Aging

After 16 to 18 hours of fasting, you should be in full ketosis. Your liver begins converting your fat stores into ketone bodies — bundles of fuel that power your muscles, heart, and brain. 

If you can do intermittent fasting for 16-18 hours a day, you’ll burn through body fat and fill up quickly when you break your fast, which makes it easy to stay in a calorie deficit and lose weight. 

After a full-day fast, your body goes into repair mode. It begins recycling old or damaged cells and reducing inflammation. If you’re looking for anti-aging or anti-inflammatory benefits, a 24-hour or greater timeframe fast is required. . 

When your body is under mild stress (such as exercise or an extended fast), your cells respond by becoming more efficient. 

Intermittent fasting is a valuable and an effective tool to improve your mental and physical health.

References:

  1. https://www.hopkinsmedicine.org/health/wellness-and-prevention/intermittent-fasting-what-is-it-and-how-does-it-work
  2. https://perfectketo.com/the-5-stages-of-fasting/

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/

Maximizing Your Social Security Benefit

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The highest Social Security benefit you or any retired American can collect at age 70 in 2021 is $3,895 a month.

The most an individual who files a claim for Social Security retirement benefits in 2021 can receive per month is:

  • $3,895 for someone who files at age 70. 
  • $3,148 for someone who files at full retirement age (currently 66 and 2 months)
  • $2,324 for someone who files at 62.

Full retirement age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits, which are determined by your lifetime earnings. If you were born between 1943 and 1954, your full retirement age was 66. If you were born in 1955, it is 66 and 2 months. For those born between 1956 and 1959, it gradually increases, and for those born in 1960 or later, it is 67.

It is important to know that:

  • Claiming benefits before full retirement age will lower your monthly payments;
  • You can increase your retirement benefits by waiting past your FRA to retire up to age 70.

To be eligible for the maximum benefit, your earnings must have equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of your working life. The maximum taxable income in 2021 is $142,800.

The maximum taxable earnings is the limit on the amount of your earnings that is taxed by Social Security. The maximum earnings that are taxed has changed over the years. If you’ve earned more than the maximum in any year, whether in one job or more than one, Social Security Administration only uses the maximum to calculate your benefits.

References:

  1. https://www.ssa.gov/benefits/retirement/planner/maxtax.html
  2. https://www.aarp.org/retirement/social-security/questions-answers/maximum-ss-benefit.html
  3. https://www.aarp.org/retirement/social-security/questions-answers/social-security-full-retirement-age/

Knowing How Much You’ll Need (Your Number) in Retirement

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Studies have consistently shown that the majority of Americans have no idea how much they need to save for retirement. Most use an arbitrary round number, such as $1 million, as the amount they require for a retirement nest egg. While having a random savings goal is obviously better than none at all, finding a more accurate retirement number doesn’t have to be complicated, according to Motley Fool.

The truth is that how much you’ll need for retirement is unique to you and your family. However, many people gain confidence in their plans to retire whilst actually planning in order to know what to set aside for daily expenses, healthcare, and recreation.

Failing to plan, is planning to fail

For retirement planning support and support over the course of your retirement, consulting a financial advisor has been shown to be a positive option. Voya Financial, in a study, found that 79% of people who use an advisor said they “know how to pursue achieving their retirement goals.” The study also found that 59% of those who use an advisor have calculated how much they need to retire, while 52% established a formal retirement investment plan.

There’s no way to accurately project exactly how much you’ll need to save and invest for retirement, but it’s a smart idea to err on the side of caution and aim to exceed your retirement number. After all, the last thing you want is to be 85 years old and running out of money.

References:

  1. https://article.smartasset.com/4-key-steps-for-retiring-comfortably
  2. https://www.fool.com/retirement/2016/10/09/the-simple-way-to-find-your-retirement-number.aspx

Disciplined Investing | Fidelity Investment

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“If you buy a stock without dividends, make sure it’s marketed well so the value increases and you can eventually sell it for a profit. Anything less isn’t worth your investment.” Mark Cuban

Many people want to invest in stocks but are simply afraid to take the plunge. Yet, investing in stocks is essential for individuals to reach their financial goals and to enjoy a life of financial freedom in retirement

However, investing in stocks is a simple process, but not easy to execute. In order to stay on track with your financial goals, it’s important to keep your emotions and confidence in check while investing since one’s behavior in the .

The key thing to understand is that over longer periods of time there is significantly less volatility in the market. Short-term, there is no question that investing in stocks is risky. While you have a chance at larger reward, there is often a greater chance of a massive loss.

This Fidelity Investment video shows how disciplined investing can help you meet your financial goals.

Six rules to disciplined investing which will help you make better long-term financial and invesment decisions:

  1. Have a long-term investment philosophy and plan.
  2. Form a prudent asset allocation based on this philosophy.
  3. Select low-cost index funds to represent asset classes in the allocation.
  4. Maintain this portfolio through all market conditions.
  5. Don’t change the asset allocation due to recent market activity.
  6. Don’t hold back on new investments while waiting for market clarity.

References:

  1. https://www.forbes.com/sites/rickferri/2015/10/06/six-rules-to-disciplined-investing