Is Joining a Lending Club a Good Idea?

Lending money

I’m a diligent saver, but seeing my savings accounts earn pennies each month in interest is frustrating. I always feel like my money should be working harder for me. The stock market is an obvious option, but stocks are not the best avenue for the money you might need in a year or two. Adding to that, I’m a huge fan of passive income. I love the idea of making money without doing anything and earning interest while I sleep. Building streams of passive income are the path to security and freedom (or so I tell myself). And so, I was drawn to peer-to-peer lending. With a modest initial investment of $1,000, I’ve averaged 10% in returns. Like any other form of investing, I suspect that my luck will ebb and flow, but it’s been successful for me and can be a useful option for other people looking for stock market alternatives. Millennials and the Stock Market According to a recent study by Bankrate, more than two-thirds of millennials are avoiding the stock market. Citing fears about the stock market, more and more young people are simply socking away money in savings accounts. However, not investing is a costly mistake

Read More...

Why NOW is the Time to Start Investing

Time to Invest

It can be difficult to decide to make the decision to start investing, especially if you feel like you don’t have a lot of money to set aside. However, the truth is that now is always a good time to start investing. Don’t miss out on what you can accomplish with your money when you combine time and consistency. The Power of Compound Interest Over Time The biggest reason to start investing now is compound interest. The idea behind compound interest is that your money makes money. When you are in debt, this is the principle that makes it feel so difficult to get out of the hole. Each time interest is earned, it is added to the balance, and then you pay interest on last month’s interest, addition to paying interest on the original amount that you borrowed. When you invest, the same principle is at work on your behalf. Each time you earn money from investing, that money is put back to work for you, and you receive interest on your earnings. That compounding interest can be powerful over time. The longer you let it grow, the better off you are. On top of that, you can benefit

Read More...

How to Teach Your Kids About Investing

How to Teach Your Kids About Investing

My parents taught me a lot of great lessons about money. They taught me the importance of saving, tracking my spending, making tough choices, and giving to charity. However, when I was growing up, they didn’t teach me about investing. My younger brothers learned a little more about investing because, a few years after I graduated from high school, mutual fund automatic investment plans started becoming popular. With a commitment of as little as $50 per month, you could open an account and use dollar-cost averaging to grow your wealth with one of the brokerage’s mutual funds. However, even then, you still had to go through a major, “traditional,” broker to set up the plan. Today, almost anyone with $25 and access to the Internet can open an account and begin investing in low-cost funds. Last year, I opened an investment account on behalf of my son, and he’s started learning about investing. Ideas for Teaching Your Child About Investing The book What All Kids (and Adults too) Should Know About … Saving and Investing by Rob Pivnick suggests that the first step is to lay a solid financial foundation. My parents helped me lay that solid financial foundation (even

Read More...

3 Ways to Start Investing Right Now for Your Child's College Education

3 Ways to Start Investing Right Now for Your Child's College Education

A college education is expensive. Most families have to encourage their children to borrow in order to afford a higher education. There’s a reason that outstanding student loan debt in the United States tops $1 trillion. If you want to reduce the amount of money your children have to borrow for college, you can start early to save up. Investing provides you with a way to boost returns over time. A few years ago, my husband and I opened a 529 plan with our son as the beneficiary. Every month, we automatically contribute to the account. Over time, our contributions to the account have grown significantly -- and there are still six more years left for the account to grow. The early you start invest for your child’s college, the better off he or she will be. Here are 3 tax-advantaged ways you can invest in your child’s college education: 1. 529 Plan “The 529 is the most popular college savings program today, and has the greatest tax advantages,” says Gerry Frignon, the President and CIO of Taylor Frignon Capital Management. What makes the 529 so attractive is the fact that the money in the account grows tax-free as long

Read More...

How Much Risk Can You Handle When Investing?

3 Things That Will Ruin Your Retirement

The Ancient Greeks understood that one of the most important steps in development is to “know thyself.” While we often think of understanding ourselves in terms of self-reflection as we choose a career or a life partner, this is also good advice when it comes to investing. As you create an investing plan, you should understand your risk tolerance, which is a measure of what you can handle, financially and emotionally. What is Risk Tolerance? Your risk tolerance is the amount of variability you can handle in your investment returns. “Properly evaluating risk tolerance is essential for creating an effective investment plan that comfortably accounts for your goals,” says Carl Aschenbrenner, a portfolio manager at Miracle Mile Advisors. There are two main types of risk tolerance when it comes to evaluating your investment portfolio: Financial risk tolerance deals with the actual numbers in your situation. “Time horizon, how much money someone has, how much money will be needed at future dates, and tolerance for volatility in the portfolio are all important factors to consider,” says Aschenbrenner. Emotional risk tolerance is more about how much you can stomach. Even if you have a high financial risk tolerance, with enough money to

Read More...

Investing Concepts for the Beginner

Investing concepts for the beginner

Investing is an important part of your well-rounded finances. While you don’t have to know everything about investing before you get started, it’s still a good idea to have an understanding of a few key terms and concepts. As you get ready to invest, here are some of the most important terms for a beginning investor to know: Bond This is a debt investment. Basically, you loan money to a government or a company, and the organization agrees to repay you with interest. The principal is usually paid at a specific date, and interest might be paid semiannually or annually. With a bond investment, you run the risk that the organization will default on the debt, leaving you without the principal. However, bonds from highly rated companies and governments are considered among the safest investments. Broker The broker arranges the trading transactions with your investments. You can choose to use a person to arrange your buying and selling of stocks, bonds, and funds, or you can use an online broker. You need a broker of some kind for your investments. Online brokers can execute your trades, usually for less than a more traditional in-person broker. Online brokers charge lower fees, but

Read More...

Simple Ways to Diversify Your Portfolio

Simple Ways to Diversify Your Portfolio

Many beginning investors hear that they need to add diversity to their portfolios. However, with all of the investment options available, it's easy for confusion to set in when you want to diversify your portfolio. The longer you look at your choices, the more complex everything appears. When everything starts to look too complicated to you, it's time to take a deep breath and realize that there are some simple ways to diversify your investment portfolio: Use index funds or ETFs The first step to diversify your portfolio is to use index funds or index exchange-traded funds, or ETFs. These investments focus on a particular asset class or sector. You can invest in an all-market index fund or index ETF that owns a little bit of all the publicly traded companies in the United States. It's also possible to invest in index funds or ETFs that focus on smaller segments, such as clean energy stocks or small business stocks. You can also find index funds and index ETFs that follow bonds, so it's possible to invest in a variety of bonds, just by purchasing shares in one fund. Index funds and index ETFs make it easy to set up your

Read More...

How to Start Investing With Less Than $500

How to Start Investing With Less Than $500

Did you know you can start investing with as little as $500? In fact, you can invest with much less than that on certain platforms. If you’ve been missing out on investing because you thought you needed large amounts of money, now’s the time to change that. In this article, I discuss six great options to invest with less than $500. Depending on your financial goals, some options may be more attractive than others. Before You Start Before we explore options for investing with less than $500, it’s important to consider times when you should hold off on investing. High interest debt should take priority over investing. If you invest while you have high interest debt, you’ll likely still be losing money. Based on historical data, you can expect to see a 7.25% return on your stock market investments. If you have debt at a higher interest rate than that, it’s best to pay off the debt first. Otherwise, the return on your investment will be cancelled out by the interest on your debt. Building an emergency fund should also take priority over investing. An emergency fund is money set aside to be used in the case of financial difficulty

Read More...

10 Lessons For the Financially Illiterate

10 Lessons For the Financially Illiterate

The financially illiterate — whether they're children or young adults — should know some basic personal finance lessons before they go out into the world. And avoiding bad habits shouldn't just apply to the young. Adults of any age can learn bad financial habits that are passed down from generation to generation, creating a cycle of poor financial decisions that they keep repeating while remaining financially illiterate. Teaching the financially illiterate “Many young people look to their parents for guidance on money issues,” says John Vento, a certified financial planner and author of a book on financial independence. “Unfortunately, many parents lack a strong understanding of financial matters, and as a result, they miss opportunities for saving, lending, and basic financial services. "We need to break this cycle — and one way to do so is to make financial literacy an educational focus in high schools, colleges, and universities,” Vento says. To help end the problems of the financially illiterate, Vento has a lesson plan that he says should be taught in the nation's high schools and colleges. Here are 10 of his lessons for the financially illiterate: 1. Live within your means This requires living on less than your

Read More...

Basics of Buying a Certificate of Deposit

Bank Vault Safe Deposit Box

Putting your money in a savings account is more profitable, and a lot safer, than leaving it under your mattress — but not by much when it comes to earning interest. As of early May, a Certificate of Deposit, or CD, pays at least double what a bank checking account does. Interest rates on CDs range from about 1% for a one-year CD, to 2% for a five-year CD. Checking accounts pay less than half a percentage point. Understanding the ins and outs of Certificates of Deposit is important before jumping in, especially for newcomers. Here are some basics you should know before buying a CD: How a Certificate of Deposit works A Certificate of Deposit is a type of deposit account that offers a higher interest rate than a savings account, issued by bank institutions, credit unions, and stock brokers. It's a low risk investment and yields a profit over time. CDs are often also called “time deposits” because of their term limits. A commitment to purchase a CD needs to be made in a three-month, six-month, one year, two-year, five-year, or greater term. A longer deposit term typically increases the rate of interest. One drawback is the money

Read More...