Introduction to Investing for Profit

Types of Stock and Bond Brokerages, Risk vs Return, and More

by Kelly R. Smith

Warren Buffett vs George Soros
Warren Buffett vs George Soros
index sitemap advanced

Ads we feature have been independently selected and reviewed. If you make a purchase using the links included, we may earn commission, which helps support the site.

Standard Disclaimer—The author is not a financial advisor and this article is intended as educational material gained from 20 years of stock market investing. It is not intended as advice.

Many people still look at making financial investments for profit as a pastime that only the rich such as Warren Buffett engage in. And perhaps that was true in the past, but no longer. There has been a shift over time from pensions to self-directed retirement plans like the 401K.

These are highly managed plans; you look over a menu of funds and choose an assorted basket of funds, hopefully after doing much in-depth research. Some funds are primarily domestic, some are emerging markets, some are bonds—it goes on and on.

Most people are knowledgeable about one kind of investment–the home they pay a mortgage on and occasionally sweeten their real estate investment by remodeling or doing capital improvements like building out their basement.



Risk vs Return

As a general rule of thumb, funds and individual stock and bond returns range from high risk/high return to low risk/low return. Which is right for you? One of the most important factors to consider is how many years you are from retirement.

The most widely-accepted strategy is to begin with high risk positions when you are young with a long window of taking risks. You then re-balance your portfolio (collection of investments taken as a whole), each year so that you are taking less financial risk as you get closer to your golden years.

Choosing Between Buying Stocks or Bonds

Ideally, you want to own both; the ratio is up to you. Bonds tend to less volatile than stocks; they yield less return than stocks. But generally, when stocks are doing well, bonds perform less well and vice versa. When the market and economy burps, as it tends to do, you might want to make adjustments to your portfolio. Stocks like a bull market and bonds like a bear market.

Taking this approach has the tendency to smooth out the net worth of your portfolio, depending on whether we are experiencing a bull or a bear market. Forbes Advisor says, “According to market ‘astrology,’ a bear indicates the market is in decline while a bull signals the market is growing.”1 See the logic here? Always consider the fees that your broker charges per transaction.

As an example, when the conditions were spot-on I began acquiring Blackrock Municipal Income Fund and I did quite well with it. What makes municipal bonds so attractive? It is very stable, and of course, tax-free. There are always exceptions. Liquor, wine, and beer are called “sin stocks.” They almost always do well because as the saying goes, “people drink when the market is up because they’re happy and they drink when it’s down because they’re sad.”

You have probably voted on a “bond issue” in your community to build a new school or library. Upon approval, your city or county borrowed the money from a municipal bond fund and you and your neighbors paid it back over time with your taxes. It’s sort of like financing a vehicle.

How Much Time do You Want to Spend on Portfolio Management?

Investors come in different flavors. They vary from the timid and/or time-challenged to the type that wants to self-manage. If you’re the first type then you might stick with a relatively hands-off completely managed portfolio, like the 401K that your employer might offer.

If you are the hand-off type, keep in mind that you will be swapping convenience for potentially high management fees. Another strategy is to establish a personal account with a brokerage firm like JP Morgan Asset Management. As they say on their website, “We have a deeply resourced global network of investment professionals who take a research-driven approach analyzing every detail to uncover opportunities and risks to help our clients build stronger portfolios.”2

You will be paying for personal attention and remember that your broker is possibly more motivated by his commissions than with your profitability.

Exchange Traded Funds: What Are ETFs?

Forbes Advisor puts it this way, “Exchange traded funds (ETFs) are a type of security that combines the flexibility of stocks with the diversification of mutual funds. The exchange traded part of the name refers to how these securities are bought and sold on the market like stocks. The fund part refers to how an ETF provides easy access to diversification and exposure to a wide variety of asset classes.”3

The financial services company buys a basket of assets, stocks or bonds, currencies or commodity futures contracts, that make up the fund. Buying shares in an ETF doesn’t mean owning a portion of the underlying assets, as it would with shares of stock in a company. The financial services firm that runs the ETF owns the assets and manages them.



Invest at Your Pace with a DRIP Fund

I really like these. When I first started researching, I had rather shallow pockets meaning not much disposable income but I was eager to join in. DRIP funds (Dividend Reinvestment Plans) offer several advantages.

To begin with, they are very affordable. Brokerages operate like this: they charge a nominal fee such as $10 dollars per month for 2 trades. Unlike other types of brokerages, using this approach you can buy a percentage of a single stock. For example, if a stock is trading at $100.00/share, you can get in at half a share for a mere $50.

Another advantage is that in many cases you can sidestep a stock broker altogether and deal directly with the company you are buying into. The best way to identify participating companies is to look through a DRIP fund directory.

When your positions (individual companies you own) pay a dividend, the company (or DRIP brokerage) automatically uses it to purchase yet more percentage of shares and credits your account automatically. It is a frills-free brokerage so you must do your own research.

Play the Market like a Pro

Finally, there are on-line brokerages such as TD Ameritrade. You pay for individual trades, but again, you must do all your research. One good thing is that their on-line tools are extensive. You can drill way, way down when you are analyzing a potential position. You can trade options or you can choose from an extensive line-up of trading options including market, stop market, limit, stop limit, and more.

I hope you found something good to take away from this article on stocks and bonds, brokerages, and the risk vs return of investments.

You Might Also Enjoy:

Resources

  1. Kat Tretina, Forbes Advisor, What Are Bear And Bull Markets?, https://www.forbes.com/advisor/investing/bear-market-vs-bull-market/
  2. J.P. Morgan, The path to stronger portfolios, https://am.jpmorgan.com/us/en/asset-management/adv/about-us/
  3. Miranda Marquit, Forbes Advisor, Exchange Traded Funds: What Are ETFs?, https://www.forbes.com/advisor/investing/what-are-etfs/

Looking for more great content? Visit our main site I Can Fix Up My Home or our partner sites:

The Green Frugal

Running Across Texas


As Featured On Ezine Articles

I offer article and blog-writing services. Interested? Contact me for a quote!



Did you find this article helpful? Millions of readers rely on information on this blog and our main site to stay informed and find meaningful solutions. Please chip in as little as $3 to keep this site free for all.

 





Visit Kelly’s profile on Pinterest.

About the Author:

Photo of Kelly R. SmithKelly R. Smith is an Air Force veteran and was a commercial carpenter for 20 years before returning to night school at the University of Houston where he earned a Bachelor’s Degree in Computer Science. After working at NASA for a few years, he went on to develop software for the transportation, financial, and energy-trading industries. He has been writing, in one capacity or another, since he could hold a pencil. As a freelance writer now, he specializes in producing articles and blog content for a variety of clients. His personal blog is at I Can Fix Up My Home Blog where he muses on many different topics.

History of U.S. Medical Insurance

Baylor University’s Initial Concept for Care Eventually Led to an Economic Behemoth

Photo of Kelly R. Smith   by Kelly R. Smith

Medicare health insurance card and benefits
Medicare health insurance card and benefits
index sitemap advanced

This article was updated on 05/04/21.

Ads we feature have been independently selected and reviewed. If you make a purchase using the links included, we may earn a commission, which helps support the site. Thank you for your support.

Today we are surrounded by so many high-tech medical apparatuses and procedures that we take them for granted. For example, I recently had laparoscopic inguinal (groin) hernia surgery. No scalpel slashing, just 3 punctures. All the work was done microscopically and I was on my feet within 3 hours. Now, that’s good customer service.

But it wasn’t always that way. More than 90% of commonly accepted medicine did not even exist in the 1950s. One of the consequences is that people, average people, not just the monied upper-crust, are living longer. A greater understanding of things like controlling high blood pressure adds years and quality of life.

The Cost of Modern Medicine

It should come as no surprise that all this progress comes with a cost. In fact, it has been rising faster than any other expenditure when looked at on a national level. Flash back if you will to 1930–we spent $2.8 billion on health care. That equates to 3.5% of the gross domestic product (GDP) or only $23 per person.

In 2015 that rose to $3 trillion. That’s $9,536 per person or 15% of GDP. During the 1980s medical expenditures rose by 117%. Of that, 43% can be attributed to inflation. 10% can be attributed to the rise in population and longer life expectancy. 23% was due to new technology, medicines, and treatment innovations. The remaining 24% is due to another instance of inflation that resides totally within the medical community. This last number tells us that there is a lack of oversight and cost transparency. There is no financial propping up as with the banking, agricultural, and auto-building industries.

The Transformation of Hospitals

It was only in the 1850s that the medical community realized that diseases were caused by microorganisms. This became known as the germ theory of disease and it was indeed revolutionary. It led to research that was to begin to focus on preventative rather than just curative treatment. Rabies was banished from human population in 1885. Diphtheria and whooping cough were brought under control. When milk began to be pasteurized the death rate of children went from 125.1/thousand to 15.8/thousand in 1925.

In 1873 hospitals, of which there were only 149 in the country, were more like hospices; the poor and and deathly-ill went there to die; those institutions were little more than petri dishes, not at all sanitary. But that changed because of the changes brought about by germ theory.

By 100 years later the number of hospitals had increased to over 7,000 and their role had morphed into medical research and clinical medicine. Exciting times. But… they cost a lot to operate and the number of patients could not be reliably estimated. The solution? Late in the 1920s hospital insurance was introduced in Dallas, Texas to stabilize cash flow. For a premium of $6 per year Baylor University Hospital would provide 21 days of care to subscribers.

Soon other hospitals adopted this model and formed confederations so that patients could choose a treatment facility. This was the business model for Blue Cross which launched in California in 1932. These were rudimentary insurance plans; they did not include co-pays or deductions, just fixed premiums meant to stabilize cash flow. One consequence is that patients gravitated toward hospital stays (expensive) rather than outpatient treatments (cheaper).

This insurance was paid directly to the hospital and not to the individual. This eliminated any opportunity to “shop around.” Since the money was not coming itemized out of the patient’s pocket, why should he or she care what the price tag was?

The Government Fails to Regulate Medical Insurance

During the mid to late 30s Blue Cross was spreading rapidly. The states moved to try to regulate them to the same standards as other types of “insurance.” But the American Medical Association and the American Hospital Association lobbied to be exempt, claiming an exception due to operating on a non-profit basis. The IRS agreed and ruled that they were also exempt from federal taxation. Blue Cross and other insurance companies emerging in the field operated on a cost-plus basis. Now there was zero incentive to control costs an strive for efficiency.

Hospitals began to compete not on price but by wooing doctor referrals. Doctors were being paid “reasonable and customary” charges. If Dr. C began charging a bit more, Dr. A and Dr. B would follow suit and the standard of “reasonable and customary” inched up. No oversight.

The Modern Medical Insurance Paradigm

When World War II drew us in, two things happened. One, the labor market got tighter since more workers enlisted in the military. Two, price and wage controls were implemented. In order to attract the best employees, companies began offering employer-paid health insurance as a fringe benefit which the IRS recognized as a business expense.

The National Labor Relations Board imposed collective bargaining on health insurance plans so unions began to demand more and more, driving prices up. But a consequence was that the patient became further distanced from the medical system and they lost many choices; one must take what is offered.

In 1965 the government waded into the medical market with Medicaid and Medicare. Initially, hospitals and doctors resisted but when they began to reap the dividends they quickly changed their tune. Now state governments largely controlled the purse strings of most major hospitals and thus could influence policy.

More recently a major factor in driving up medical costs is litigation. Medical malpractice suits have exploded. Cases have increased by a 1:300 ratio in the years from 1969 to 1990 alone. A special class of lawyers have even emerged to take advantage of this low-hanging fruit; these are your ambulance-chasers and your class-action law firms where actual plaintiffs make pennies while the lawyers walk away with the bulk of the settlements.

This short history of American medical insurance should serve to put things into perspective as we have a national debate over how it really should be handled. Should we stay on our present course or model our system on Britain or Canada? Should we believe in a socialist “free for all” system as Bernie Sanders advocates? (Hint: there’s no such thing as free.) Should we adopt an Obamacare model complete with a Jacobin death panel? This will continue to be an evolving national debate.



More Trending Content


Looking for more great content? Visit our main page or partner sites:

I Can Fix Up My Home

The Green Frugal

Running Across Texas


As Featured On Ezine Articles

I offer article and blog-writing services. Interested? Contact me for a quote!


Did you find this article helpful? Millions of readers rely on information on this blog and our main site to stay informed and find meaningful solutions. Please chip in as little as $3 to keep this site free for all.

 




Visit Kelly’s profile on Pinterest.

About the Author:

Photo of Kelly R. SmithKelly R. Smith is an Air Force veteran and was a commercial carpenter for 20 years before returning to night school at the University of Houston where he earned a Bachelor’s Degree in Computer Science. After working at NASA for a few years, he went on to develop software for the transportation, financial, and energy-trading industries. He has been writing, in one capacity or another, since he could hold a pencil. As a freelance writer now, he specializes in producing articles and blog content for a variety of clients. His personal blog is at Considered Opinions Blog where he muses on many different topics.

Why Trump’s Border Wall Must be Built

index sitemap advanced
Trump's Border Wall
Trump’s Border Wall

This post was updated on 12/29/18.

The proposed border wall between the southern border of the United States and the Northern Border of Mexico has enjoyed a back-and-forth history. For the most part, the Republicans favor it and the Democrats waver one way or the other depending on the political wind of the moment. At the moment the vacillators are against it. Why? Because President Trump is for it, of course. For them, it’s all about political posturing, not national security.

Nancy Pelosi has gone so far as to cal the wall “immoral.” This from the supposedly Catholic woman that champions abortion on demand? That’s rich. And consider Chuck Schumer. Factcheck.org has this to say of the Secure Fence Act of 2006, “Sen. Chuck Schumer and then-Sens. Barack Obama, Joe Biden, and Hillary Clinton were among a bipartisan majority that voted in favor of the legislation, and it was signed into law by President George W. Bush.” Uncle Chucky just can’t seem to be able to think for himself; not consistently, at least.

But let us not forget that the wall is for the benefit of the average taxpayer, not these high-and-lofty politicians that live in crime-free gated (and with WALLS!) communities. They don’t have to scrabble with illegal immigrants for social services, healthcare, and public schools like the mass of taxpayers. The American Royalty can afford to poo-poo the wall and national sovereignty but there are a plethora of reasons for building it.


Open Borders are Dangerous

The Department of Homeland Security tells us that it apprehends an average of 10 known or suspected terrorists every single day that are entering the United States. And despite claiming to support border security, Democrats in practice have blocked all efforts to secure our southern border and protect our communities.

Free Shipping Coupon for PatriotDepot.com


FBI Data Shows Terrorists are Sneaking in Through Mexico

Leaked FBI data obtained by Breitbart Texas has revealed that there were 7,712 terrorist encounters in the US  in just the past year. In the time between July 2015 and July 2016, the majority of terrorist encounters (defined as interactions with known or suspected terror watch list suspects by law enforcement) unsurprisingly happened in the southern border states. Texas, California, and Arizona ranking among the highest.

A Wall is a Physical Barrier that Hinders Human Trafficking and Drug Smuggling

Although there are some portions of wall constructed, huge gaps in other areas act as funnels through which illegal aliens, drugs, and other forms of contraband pass unhindered.

Of course Trump’s wall won’t stop everything; nothing will. But it will create such a hindrance that the Border Patrol can more easily manage the situation. Augmenting the scenario with drones and wall-mounted cameras will help to round out border security.


Rising Cost of Illegal Immigration

Border wall deniers (such as the current crop of Democrat Socialists) love to wail about the cost of construction but perhaps it is time for a reality check. Estimates vary but it is safe to say that $70 billion would get it done. Is this too much? The Center for Immigration Studies says, “if a border wall stopped a small fraction of the illegal immigrants who are expected to come in the next decade, the fiscal savings from having fewer illegal immigrants in the country would be sufficient to cover the costs of the wall.”

Currently, Illegal immigration is estimated to cost the United States millions of dollars, and according to President Trump, $113 billion each year in lost income tax revenue. Illegal immigration is recognized as a strain on government spending by overburdening social welfare, health, and education programs.

Another thing to consider is remittances, that is, money sent back to Mexico from illegal aliens to family and friends. Much of these wages come from under-the-table jobs (untaxed) meaning that these individuals are taking these jobs out of the American job pool. The inherent greed of some employers is denying jobs from some U.S. citizens while at the same time denying revenue to the government to pay for defense and public services.

But the end result is that although these illegals are consuming public services, they are taking their wages out of circulation rather than contributing back to the system. Those that think the amount of money is a pittance might be surprised.

nbcnews.com says, ” Mexico’s central bank reported Mexicans overseas sent nearly $24.8 billion home in 2015, overtaking oil revenues for the first time as a source of foreign income. Remittances were up 4.75 percent from 2014 when they totaled $23.6 billion, the Bank of Mexico said. They had never before surpassed petroleum since the Bank of Mexico began tracking them in 1995.”

In other words, American hard currency that should have been at least partly spent here is going to support the infrastructure of Mexico. The next time you go to the polls and the open border-types are soliciting your vote, remember that those they are inviting with open arms are building roads, bridges, and hospitals in Mexico while yours crumble.

These are just a few reasons why Trump’s border wall must be built. There are many others. The problem is that although the Democrats supported it when it was politically expedient to their careers, they have been on the fence since 2006 as they try to reshape America, Mexico, and Canada into a facsimile of the EU. We know how well that’s working.

End of 2018 Border Update

The assault on our border by Central American invaders seems likely to continue. A new caravan originating out of Honduras is planned for January 15, 2019. At the outset is is estimated to be comprised of 15,000 people with more expected to join as they make their way north.

This puts Mexico in a bad position. They have always been content to get flush and fat with all the money generated, both legal and illegal, counting on former U.S. administrations to just open the floodgate that is our mostly unprotected border. The fly in the ointment now is That President Trump is having none of it. That puts the onus on Mexican authorities to feed, house, and provide social services and possibly work for the invaders.

Now that their social services are being stretched and their jobs are going to invaders, the Mexican citizens are getting fed up with the situation. “Well, now the government does something. That work is for Mexicans that need it,” said Anna Pérez from Palenque, Mexico, on Facebook. “Opportunistic people who just want to take advantage of the Mexicans.” That reeks of sour grapes to U.S. citizens that have lost their jobs over the years due to the opportunistic policies from the likes of Pelosi and Schumer.

Meanwhile, the U.S. government remains in a state of partial shutdown as the Democrats refuse to protect our borders. And rather than doing her job to work on a solution to Trump’s wall, Nancy Pelosi continues to party down in Hawaii. For shame.


Looking for more great content? Visit our partner sites:

The Green Frugal

Running Across Texas


As Featured On Ezine Articles

I offer article and blog-writing services. Interested? Hire Me!


Did you find this article helpful? Thanks for supporting this free site with a small donation!

 




Visit Kelly’s profile on Pinterest.