Will the Dow Reach 20,000 in 2015?

Will the Dow Jones Industrial Average (DJI) reach 20,000 in 2015? An economics professor from Wharton School of Finance [Jeremy Siegel] was recently interviewed on CNBC.com and believes the Dow could get to 20,000 should the US economy grow by three or four percent this year. Siegel also believes the market is under-valued and markets usually go beyond fair market value before retracting. For the Dow to reach 20,000, a few things may need to happen. Most notably: no inflation. Other factors include: low interest rates, low unemployment, low oil and gas prices and finally no supply constraints.

At CFE Finances, we believe it would be great to see the Dow reach 20,000 this year. It is a great reason for all the do-it-yourself investors to stay invested. We need to keep doing our research, invest regularly, and we will all benefit if the Dow reaches 20,000. Another reason why the Dow could reach 20,000 is that over the last several years, companies have been buying back their company stock, which has lowered the amount of shares available to buy. This makes company shares more valuable because there are fewer shares to buy. Today most people in the US are saving in a 401k, 403b, IRA or Roth account for retirement. Many of these retirement funds are managed by fund managers who purchase company stocks in large quantities which helps drive the stock prices up. This should continue in 2015 and could help our theory of the Dow reaching 20,000.

The average price to earnings ratio (PE Ratio) in today’s market is 17.5 which is lower than the price to earnings ratio of 30 seen in the late 90’s bull market or the dot com era. As investors, we want to purchase stocks below its 5 years average PE ratio. We realize it’s hard to find good companies in today’s market with a price to earnings multiple below its 5 year average. That’s why we say you need to be a patient investor and if you are, you will take out most of the risk in investing in stocks. The old saying buy low, sell high should always be in the back of your mind.

The Dow today as I write this newsletter is trading above 18,000 which may seem high and might be at a point of a correction. We all need to realize corrections are sometimes beneficial because it’s healthy for the market and gives us an opportunity to purchase good company stocks when the market declines. Long time investor, Warren Buffet’s right hand man at Berkshire Hathaway (BRK-A) Charlie Munger, says you need to be a patient investor when buying stocks. Mr. Munger has an estimated net worth of $1.3 billion.

Another important point to remember or a friendly reminder to consider, when adding stocks to your stock portfolio and reducing the risk of loss, make sure you keep in mind to diversify your stocks selections. In addition, keep in mind, many of the US equity are at all-time highs, so as individual investors, we all need to do our homework before purchasing any stocks.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.

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Why Invest in an After Tax Stock Brokerage Account

If you have purchased our Investing for Beginners course and have started your own stock brokerage account, then congratulations; You are on your way to being a wealthier person. Investors are being encouraged to save their money for retirement through a company 401k plan or in an IRA account. This is an excellent and necessary investment strategy for retirement but there aren’t enough people investing in after tax stock brokerage accounts. Why is it important and what is the benefit to investing in a stock brokerage account? It allows you to do whatever you want with your money without paying a 10 percent penalty if you want to withdraw your money before you are 59.5 years old. The government charges a 10 percent penalty if money is removed from a retirement account before the age of 59.5. (There are some exceptions to this but usually you must pay the penalty for early withdrawal.)

We want to make it clear that we at CFE Finances do not want to discourage anyone from investing in a 401k or IRA because we all need to save for retirement in a safe and effective manner. Our goal is to build wealth through stock investing in both a stock brokerage account and a retirement plan such as a traditional 401k,IRA, Roth 401k or a Roth IRA. There might be a time when you want to withdraw money from your savings say for a down payment on a vacation home or to pay off existing debt. You are able to withdraw it from your brokerage account without paying a 10% penalty. The only other way of protecting your investments in the stock market (which may go down in a retirement fund) is to put your investments in a stable cash fund but the return is very low. Whereas you would much rather use the money to invest in real estate, automobile or something other than just losing the money or move the money into a cash account before the market drops would also be another option. It is a rewarding feeling when a stock you bought appreciates by 50 to 100 percent and you sell it to purchase something. Although we encourage investors to always be fully invested in stocks, we do all realize you need to take profits when you reach your investing goals. So our advice to you is to invest in both types of accounts. We all know cash is king so if we need to purchase goods we need it to be available while saving on fees, penalties and taxes.

A goal all investors should have is to open an after tax stock brokerage account, along with more than one retirement account. For example, open an Ira Rollover account along with your company 401k, because you are allowed to trade stocks, mutual funds or ETFs within the rollover account and most 401k plans only allow you to trade their company stock and funds which are offered by the company. We understand you cannot always invest in all of these accounts but you need to know your options.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.

Investors Fall Optimism

This newsletter is intended to help our new investors through a time when markets are at all new highs and investors are wondering what the future will bring in the next few months. Customers have been asking, is now the time to buy? Investing to make money does take research of many quality companies as well as have patience to be sure to buy great companies at a good price. For example, an investor that buys great companies because of their strong fundamentals and understands great companies that have excellent past performance, always have them on their radar as stocks to purchase when there is a down day in the market. An investor needs to build its core holding and reinvests their dividends to build wealth. Also an investor can own what we call a speculative stock which may be lower in price and have a high P/E ratio because it looks like it’s a growth company ready to take off in price.

Now back to the today’s markets. With the Dow industrial average and the S&P 500 at all new highs, are investors worried about a big correction coming in October? Investors should always be concerned with the market up and downs. Yes it is true once the federal reserve stops adding liquidity (money) into the economy (by buying US Treasury Bonds) and the 75 billion dollars they are spending a month stops, because they think the economy data indicates it has recovered and they raise interest rates for the first time in 5 years there probably will be some type of correction in the stock markets. How much of a correction nobody knows. Although we need to be prepared for it by having money saved so when the market drops we can all purchase our stocks on our wish list and buy, buy, buy! For those who are pessimistic and think that the market is going to correct and not come back to new highs, again we need to explain to them to look at past history of the stock market and they will see the markets have always come back in a big way. We would also say to them read some books that the greatest investor of all time Warren Buffet has written or recommends to read and you will see what we mean by market recoveries. Of course we are not saying to stop investing and wait for only your best stocks to be in the buy zone on our your list. Try to find beaten down stocks that have had strong sales and earnings performance in the past, or maybe they had a bad quarter or two but you find some information that makes you feel comfortable about buying the stock that has some potential upside. Be what is called a contrarian investor. As I write this article what comes to my mind is Whole Foods (WFM) which is an excellent company, its stock price is down 40% from its high. You might want to look at other grocery stores in its industry to compare, like Kroger (KR) which just announced they are hiring 20,000 new permanent employees. Compare the two companies. Remember you want to invest in great companies that you have researched that are at a stock price low enough which you believe will go up because they know how to make money.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.

401k and IRA Rollovers compared to Individual Stocks for Retirement

This article is intended to answer the question of: should I rollover my 401k into an IRA rollover if I am leaving my current job or retiring soon? One of the great things about employer 401k plans are that these funds have low fees; So you could leave your money in your employer 401k and enjoy those low fees.

If you have gone through our course or know enough about individual investments, then you may be interested in controlling some of your retirement money yourself. You can do that by rolling over some of your 401k plan into an IRA rollover so that you can control those investments yourself. For example, once you rollover some of your 401k, you can then buy individual stocks which can grow your retirement portfolio through price appreciation and dividend growth. The great thing about do it yourself investers is that we know how to earn money through stock investing and we do not need to pay a financial advisor to show us how to manage those stock investments.

Now to diversify your retirement you may want to invest some of your money in an intermediate annuity which pays a fixed interest rate. For example, You could invest $100,000 in an annuity which pays 6 percent; this would be approximately $600 a month for life. This amount along with your stock dividend checks each quarter and social security should give you enough money in retirement. Keep in mind that you do not need to convert cash into an annuity until you reach the retirement age which for most us is the age of 65. Also, another way to save money (due to fees charged in mutual funds and even in low charged fees in a stock index fund) is to invest in ETFs (Exchange Traded Funds) due to low commissions on trades. We have not explained mutual funds in our first course because we are focused on individual stock investing but we need to mention other types of investments because your IRA or 401k may include investments in ETFs, mutual funds etc… Knowing how much the fees add up to in a retirement account is very important.

The reason I wanted to share this article is because sometimes people who are preparing for retirement are being advised by a financial advisor who charges either a high commission or a monthly/yearly fee which adds up to a lot of money. The do-it yourself investor avoids these significant fees by managing everything themselves. So remember more control of your retirement investments is a great way for you to save money.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.

Investment Opportunities

This newsletter is intended to inform our new investors on stock market updates. The Dow Jones Industrial Average (^DJI) hit its first record close in 2014. On April 30, the Dow closed at 16,580.54 up +45.47 points or 0.28%. What investors need to realize is that new stock market highs, or days when the stock market rises by a large percentage, do not happen as often as we would like and therefore, investors need to be invested in stocks to reap the benefit of new market highs.

Now that we are into the month of May, it is interesting to know the history of stocks being sold in the month of May. May can be an investors buying opportunity for stocks. The month of May has a history of stocks being sold. History shows stock prices trade lower from May thru October and trade higher from November thru April. So if you have a stock you are interested in, it might be on sale this month.

One stock you may want to research is Disney (DIS). Disney reported excellent quarterly revenues and earnings — beating analysis’s expectations. Today, Disney stock is trading over $81 dollars. Disney is a great stock to own for the long term. When you think of owning a stock for the long term, building wealth through stock price appreciation, and stocks which pay a dividend, such as Disney, should come to mind. There are many other stocks which fall into this category which investors can own. Another company stock, WhiteWave Foods Company (WWAV) also reported excellent earnings in May. Although WhiteWave is more risky than Disney, it is worth researching. They are trading slightly above $29. They sell organic food and beverage products. Organic dairy products for example sold under the Horizon and TruMoo brands are becoming very popular. This company may also become a long term stock to hold.

We also would like to share with you some MLP’s (Master Limited Partnership) stocks which are partnerships which invest in oil and natural gas pipeline industries. These two MLP are worth researching and also pay high dividends. They are Kinder Morgan Energy Partners, LP (KMP) and Energy Transfer Partners, LP (ETP). These stocks benefit from their combined tax benefits of a limited partnership along with the liquidity of being publicly traded stocks. These two companies can help add cash to your portfolio from their high dividend payout. Kinder Morgan (KMP) current dividend is 5.52 per share (7.40% Yield) per year and Energy Partners (ETP) dividend is 3.74 per share (6.60% Yield) per year. Remember you could also reinvest dividends received and automatically repurchase more shares.

The stocks mentioned in this newsletter are for our customers to review and to do their own research before making any decisions to purchase them. CFE Finances goal is to increase our customer’s knowledge of company stocks that have demonstrated investor’s growth either with stock price appreciation or stocks which pay dividends. We are not recommending stocks in any of our newsletters for purchase because we are an educational business.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.

Market Movers

This newsletter is intended to inform our new investors how the economic data helped lift the stock markets on Monday April 14, 2014. Stock markets opened higher due to improved U.S. retail sales numbers for March, which was reported at a 1.1 percent increase. The number was stronger than expected. Also a pleasant surprise was that February retail sales were revised upwards of 0.7 percent, which is a large deviation from the 0.3 percent rise initially reported. CNBC.com reported this week, their March nonfarm payroll job numbers were roughly in line with expectations, though it may not seem like jobs are picking up. Americans realize that we need more jobs to create more opportunity for everyone including our college grads, young and middle aged individuals, and aging individuals. From an investing perspective, a stronger working economy makes the stock markets grow which builds an investors wealth.

On the earnings front, companies still continue to report both quarterly sales and earnings. Some companies are beating analysis revenues but some may be light on earnings estimates or vice versa. For example: Google (GOOG & (GOOGL) (one of the most impressive growth stocks) missed both its analysis estimates on revenues and earnings which brought the stock down. On the other hand Apple (AAPL) beat Wall Street analyst expectations in revenues and earnings due to iPhones sales; they also announced an 8 percent dividend increase as well as a 7 to 1 stock split. Owners of Apple stock hit a home run with this first quarter announcement. Facebook (FB) the social media giant, had a good quarter as they beat both revenues and earnings. Dow components PepsiCo (PEP) beat analyst expectations while Coca-Cola (KO) met earnings and narrowly beat sales estimates. IBM (IBM) missed both revenues and earnings while Intel (INTC) was in line with revenues and did beat earnings estimates. Varian Medical (VAR) beat revenues but missed slightly on earnings.

New home sales which were reported on Wednesday April 23, 2014, indicated a big drop in housing prices in March. New home sales were reported down 14.5 percent, which is causing a slowdown in the economic housing recovery. It appears that since prices have gone up so quickly, it has produced a situation where many Americans are unable to purchase a new home or an existing home due to these high prices. Mortgage rate increases are also contributing to this slowdown. It will be interesting to see how Home Depot (HD) and Lowes (LOW) report their earnings next month due to them being tied to the housing market.

Do investors think the economy is growing? In my opinion, I think the economy is growing but at a slow pace. Housing has improved due to low interest rates as well as jobs growth. Investors need to monitor the financial news but realize not to be spooked by them. As long as you are invested in solid companies you can still make money in stocks while the markets move up and down.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns email us from our contact page.

Earnings Season

This newsletter is intended to inform our new investors that now that it’s spring, it’s also earnings season. Not all companies report their earnings at this time of the year, but many tend to. Earnings season is the time of the year when we need to review any earnings of a company stock that we own or are interested in. If you want to find out if or when a company reports earnings, you can look at yahoo finance and enter the stock symbol. and on the bottom left hand corner of quote information and you will find where the next earnings release date is usually shown.

Some of the companies reporting this week are Citigroup, Bank of America, Johnson & Johnson, American Express, General Electric, IBM and Google. Fifty or more S&P 500 companies are reporting this coming week. There have already been 29 companies in the S&P 500 who have reported earnings thru April 11th 2014. It is always important and interesting to see what type of quarterly sales and earnings a company you own (or would like to own) will report because the market will drive the stock price up if your company had a stellar quarter. But the reverse can also happen and earnings can be disappointing and the stock will drop. So, keep an eye on company earnings.

Also on Monday April 14th 2014, investors will be looking for market support when retails sales numbers are released. Economists are predicting retail sales to be up .8 tenths of a percent. This is due to good car sales numbers in March. The stock markets have been dropping hard since the end of last week; we investors need to be strong through this earnings season because the volatility will continue until all companies have reported their earnings.

Another reason there is instability in the markets lately is the Federal Reserve had decided to lower quantitative easing (QE) in December because they believe the economy is recovering due to all the liquidity they have put into the market over the last 5 years. What that means is the Federal Reserve is monthly purchasing government and mortgage bonds with enormous amounts of money. The QE was $85 billion a month and has been lowered to $75 billion. This amount of money will continue to be tapered lower by the Federal Reserve as long as the economy continues to show improvement. This has many investors and money managers nervous which is why stocks have been volatile.

This makes for a good time for new investors to watch the stock markets along with company earnings, because they can enter the stock markets when stocks are dropping in price. Good companies maybe reporting lower than expected earning as well as the uncertainty of the economy can create a buying opportunity, thus giving the small investor a chance to position themselves for when the next big bull market happens.

Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns email us from our contact page.