Investing

Companies Are Backing Out Of The Facebook Libra – Here’s Why

October 14, 2019 By Amanda Blankenship Leave a Comment

Facebook has been talking about launching its very own cryptocurrency for a few months now. Mark Zuckerberg has been able to find some pretty big companies and names to back the social media crypto idea, including Mastercard, PayPal, eBay, and Visa. However, this week, many companies and investors have decided to back out of the Facebook Libra.

About the Facebook Libra

If you’re interested in cryptocurrencies, chances are you’ve already heard about the Facebook Libra, also known as GlobalCoin. The social media giant proposed the idea of its own cryptocurrency to combat unbanked individuals around the world. Believe it or not, there are billions of people without bank accounts worldwide.

In Southeast Asia alone, 438 million people (73 percent of the population) are without bank accounts. India’s population has the second largest unbanked population at 190 million. Women make up a majority of the unbanked individuals around the world (55 percent).

The Facebook Libra would help allow people to pay and be paid virtually without a bank account. As smartphones and technology have become more affordable and available around the world, it is making lower cost services available. Just about everyone has a Facebook account, making a Facebook-based cryptocurrency a viable solution.

Why Key Investors Are Backing Out

At first, the Facebook Libra was backed by 28 large companies, including Mastercard, Visa, PayPal, Stripe, eBay, and Mercado Pago. This week, those six “founding” members decided to take a step back from the project. Why?

Well, the Libra has failed to prepare to meet any regulatory standards as far as currency goes. The G7 task force produced a report that helps outline rules for G20 economies. It notes that currency like the Libra that have the potential to scale at a rapid pace could pose potential problems.

Any supporters of global stablecoins, such as the Libra, will need to be legally sound. Additionally, the companies must be able to ensure consumers are protected and any currency is not being used to launder money or fund terrorist organizations.

The report stated, “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed.” Facebook has already warned investors that regulatory scrutiny may delay or completely stop the launch of the Libra.

On top of that, any loss in confidence where the cryptocurrency is concerned could threaten global economic instability. Because of this, many of the key players have stepped out of supporting the Facebook Libra, along with any other stablecoins.

Now, the Libra has lost approximately $60 million of its initial funding after six key players backed out, leaving the future of the currency uncertain. The social media giant may find comfort in the fact that it hasn’t lost all of its supporters. It has also gained the support of tech leader IBM. But will that be enough to save it?

Readers, what do you think about the Facebook Libra and other stablecoins?

Strategies for Making a Good Art Investment

October 8, 2019 By Amanda Blankenship Leave a Comment

Mega-auctions of art in New York and other key locations paint a picture of a burgeoning art market that could outpace more traditional asset classes. In 2019, a 10.6 percent return in the art market was revealed as other categories were outdone. This leaves many wondering what the secret sauce is of this unique sector and what the strategies are for making a lucrative art investment.

Profiting in a $60 Billion Market

In recent years, the value of art sales has increased, passing $60 billion. Most collectors and buyers who purchase art for the purpose of collection may also consider it for investment purposes. Supply and demand determine the value of the artwork. Art which is rarer and considered as high quality is likely to be priced higher than other artwork.

It is important to establish a trail between the creator and the owner of the artwork. There are different online mediums that help make the process easier. Traceability gives new buyers more confidence in the value of artwork. As a result, they are more likely to pay more for it.

Art Investment Provides A Hedge Against Inflation

During times of high inflation, art has maintained its value and even increased. Over the years, more people have come to appreciate it as a hedge against inflation. As more people shy away from cash, it has become apparent that there is a limited amount of things that can be invested in. High-quality artwork is more likely to outperform lower-quality works during periods of inflation.

Many investors consider auctions to be one of the most cost-effective ways to purchase art. This is due to the fact that retail prices are usually set at a high premium. Investors also stand to gain from the sale of art at auctions. The Scull auction of 1973 played a significant role in setting the precedent for art auctions. Prior to the sale of $2.3 million worth of works at the auction, few people could imagine that collectors could make so much.

Art Investing in the U.S. and China

The United States and China account for the majority of auction sales in the art sector. The U.S. constituted 35 percent of auction sales, while China was responsible for 33 percent. Activities in these markets are the driving force behind price trends in the art sector.

With as little as $10,000 you can invest in artwork. However, artwork that costs $10,000 is highly unlikely to make you a ton of money. The chances of making millions from artwork that costs 5 figures have been likened to winning the lottery. This shouldn’t be a reason to not buy artwork, but if you are doing so for profit you should think twice. There’s a chance your piece of art may not appreciate in value at all. Even with five-figure investments, you may only make around $1,000 (and it could take years).

There are still advantages when purchasing art even with four-figure investments. Surveys reveal that the average price at which works of art are bought is around $5,000. Very few people have been reported buying art for over $1 million.

Those that have invested considerably more money into art have benefited from over 100% growth in the value of their investments. Case in point, pieces of work valued at over $10 million increased by 148 percent over 10 years.

Before you buy anything though, be sure to do your research. Find out if anyone else is benefiting from an art investment you’re looking into. You may even want to consult a professional or check out the information provided on Masterworks, an art investment platform.

Futures Trading: 4 Tips for Getting Started

October 8, 2019 By Justin Weinger Leave a Comment

There are ample opportunities for the average American to invest. There are stocks, bonds, mutual funds, real estate, precious metals, etc. But when it comes to maximizing leverage and doing more with less, futures trading is by far the most appealing option.

What is Futures Trading?

A futures contract is essentially an agreement to buy or sell an asset at a future date at an agreed-upon price. Everything from oil and gold to orange juice and corn can be sold on futures contracts.

As NerdWallet explains, “Futures contracts are standardized agreements that typically trade on an exchange. One party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date. The selling party to the contract agrees to provide it.”

Anyone can trade futures. Investors, speculators, and business owners are all major players in the purchase and sale of futures contracts. They allow the latter individuals to protect against the possibility of severe price swings. (For example, a farmer can purchase a futures contract on corn to mitigate the impact a severe drought could bring.)

Individuals and speculators, on the other hand, don’t actually have any interest in the underlying product. They simply treat it as an investment.

4 Tips for Getting Started

Trading futures, as with any other investment, comes with a tradeoff between risk and reward. Here are some things you can do to minimize the former and maximize the latter:

Understand the Basics

One of the most attractive perks of trading futures is that it allows an individual to enjoy large gains with small investments (thanks to high leverage). However, this also means the possibility of losing money is more severe than with a traditional investment in the stock market.

“The greater the leverage, the greater the gains, but the greater the potential loss, as well: A 5 percent change in prices can cause an investor leveraged 10:1 to gain or lose 50 percent of her investment,” NerdWallet mentions. “This volatility means that speculators need the discipline to avoid overexposing themselves to any undue risk when trading futures.”

Don’t trade futures until you’re totally comfortable with the concept of leverage and how it can work for you or against you.

Choose a Trading Platform

One of the keys to success is to choose the right futures trading platform. There are plenty of options, but you should look for the one that’s the right fit for your needs. RJO Futures encourages people to choose a futures trading platform with the following five features: (1) ease of use, (2) practice account, (3) clear order types, (4) risk management tools, and (5) access to support (when needed).

It’s also important that you think about usability. While not as important as the technical aspects and system support, you should also consider things like intuitive navigation and aesthetic appeal. The more comfortable you are with the platform, the more likely it is that you’ll find it efficient.

Set Stop Loss Limits

As an amateur/inexperienced futures trader, you should never place orders without also setting a stop loss limit to protect yourself against unnecessary losses.

A stop loss limit is an instruction that you file with the broker to buy or sell the contract if – and only if – it reaches a certain price point during a specific trading session. This limits both your losses and your gains, which will almost always benefit you in the long run.

Study What Others Do

The best way to learn how to trade futures is to study what other successful investors are doing. The more you learn about different traders, the clearer the picture will come. You don’t necessarily want to subscribe to one theory or philosophy. Instead, it pays to soak up as much knowledge as you can and apply these insights across the board.

How Will You Proceed?

Do you feel like trading futures is something you could be interested in? Or are you better off exploring other investment opportunities? Nobody can make the decision for you. It’s up to you to use your best judgment and proceed with caution. As long as you do your due diligence and put the right safety mechanisms in place – such as stop order limits – you’ll be fine.

Learn from those who’ve been there before and treat each loss as a learning opportunity. The more you prepare, the better your results will be!

How To Invest With No Commission

October 8, 2019 By Flanice Lewis Leave a Comment

Investing is now more inexpensive than ever. With the most popular firms reducing trade commissions to zero, investing is more accessible to everyone. Or it would be if everyone knew how to invest.

Choose Your Investment Firm

First, you have to pick a brokerage firm. This company will be your avenue to the stock market, and its website will process your transactions. The largest firm with no commission fees is Charles Schwab. Other commission-free firms are TD Ameritrade, Etrade, and Robinhood, with Robinhood being mobile-only. With these firms, you can buy shares of stocks, funds, and commodities. Most new users will start with stocks, exchange-traded funds, or mutual funds.

Choose a Percentage or a Whole

Any of the four would be good to buy and sell whole shares of stock. If you want to buy a percentage of a share, you can use applications such as Stash, Acorns or Stockpile. Also, there is a new option from SoFi called Stockbits. While Acorns and Stash may be mobile-only like Robinhood, they have a monthly fee. Stockpile has a cost of $0.99 per trade. Stockbits is free to use, and you can start investing with $1.00. Stockbits also offers access to financial experts.

Open an Account

Once you’ve chosen the firm or firms, you will apply for a new account. The process includes selecting your account type, funding the account, and gaining approval based on your answers on the application. They are similar to opening a bank account with additional questions related to the firm and what time of investing your plan to do. Additionally, they will ask if you are a stockbroker or if you’re related to anyone that works for the company. Also, don’t be alarmed that the firms will require your social security number. Investment firms, like banks, have to report any interest or dividend income for tax purposes.

Place Your Trade

To place a trade, you choose the stock or fund that meets your criteria, e.g., price, dividend yield, trend, etc. and complete a buy order. In most scenarios, you can click buy or sell, choose a quantity, set your desired dollar amount, and set any limits or expiration dates. You will confirm all of the details then submit your purchase order. Since the stock market fluctuates, your order may execute at a different amount than ordered. By setting limits, you can minimize the variance or cancel the order before it gets too high or low.

Invest in a Portfolio

If you purchase stock using Acorns, you won’t choose a stock or fund. You will assess your risk, and the app will choose a fund for you based on their current offerings. It will also automatically invest for you once you reach $5.00 in roundups or any figure you’ve allotted to transfer for extra investments. Essentially, you set up everything on your phone, and it rounds your purchases on connected cards up to the next dollar. This app is excellent if you want to start investing, but you don’t have a lot of money yet.

Other ways to invest in a ready-made portfolio are the Stash app, Ally Invest, SoFi Invest, and Etrade Core Portfolio. These may be great alternatives if you roll over an old 401(k) from a previous job but don’t want to pick individual stocks. Ally has a $100 minimum but no advisory fees. SoFi Invest has no fees if you have a loan with them, and you can start investing with only $1.00. Etrade has the highest minimum at $500. However, it has more educational tools if you see the value in those.

Whichever you choose, make sure you are comfortable. Read user reviews to gain insight into controls, customer service, and other important topics.

The Pros and Cons of Investing in ETFs

Stash App: Investment App Review

How to Invest in Online Gaming

Why Did The WeWork CEO Step Down?

October 4, 2019 By Tamila McDonald Leave a Comment

Adam Neumann, the founder of WeWork, is stepping down as CEO of The We Company. He will also reportedly give up majority control. Although, he is expected to remain on as chairman of the coworking space company. He made the decision after experiencing mounting pressure over the course of the summer of 2019. Here’s a look at why the WeWork CEO is stepping down.

A Look at Adam Neumann

Adam Neumann took the shared-office concept and used it to create one of the most valuable startups on the planet over the past decade. His boisterous personality and persuasion skills helped him convince investors to hand over billions of dollars. Thus, asserting that WeWork was going to change the world.

Along with his optimism and energy, Adam Neumann became known for his lavish and indulgent lifestyle. He used WeWork money to fund pet projects. Including taking private jets, buying luxury homes, and becoming known for his hard-partying ways.

In 2016, Adam Neumann took out a $7 million loan from WeWork. Though that was ultimately repaid. He also made millions acting as a landlord for WeWork. He leased buildings he owned to his company for substantial sums, a scenario that created a conflict of interest.

Adam Neumann also had a reputation for being impulsive. At one point, he banned meat at his company. These types of decisions left executives to try to find a rationale for justifying the change.

Cumulatively, many people began to question Adam Neumann’s capabilities and actions.

An IPO Failure

Based on his attitude, many would consider Adam Neumann’s view both ambitious and idealistic. However, he pressed forward even as some began to question him. He intended to take the company public this year. In January, the company had a private valuation of $47 billion. Some on Wall Street began telling him that it could be worth much more once shares were on the stock market.

But, as the IPO drew closer, cracks started to show. Before Adam Neumann filed for the company to go public. He cashed out at least $700 million in shares. As the IPO process went forward. The company’s estimated market value tumbled. At one point coming in at between $10 billion and $12 billion.

Adam Neumann experienced an increasing amount of scrutiny. WeWork’s goal was to raise a minimum of $3 billion with the public offering. Enabling them to qualify for a $6 billion line of credit. However, it appeared that the company would only raise a bit more than $2 billion if it went forward with its intended IPO date. So, in mid-September, WeWork’s IPO was officially delayed.

Postponement Announcement

That postponement announcement was followed by additional troubling news. Adam Neumann’s lifestyle came under fire. This included his tendency to drink heavily during the day in the early years of the company. As well as using marijuana when on private flights.

As news of the delay and his antics spread. Doubts about Adam Neumann’s abilities ramped up. A group of WeWork directors, some of whom may have been connected to SoftBank Group Corp., WeWork’s largest investor, began lobbying to limit the CEO’s power.

Couple that with reports showing WeWork’s $1.5 billion in revenues countered by $1.4 billion in operating losses (for the first half of 2019). The company appeared to be in crisis. Additionally, some reports suggest that significant layoffs are on the horizon. Possibly reaching up to 5,000 employees, or more than one-third of WeWork’s workforce.

A CEO Steps Down

Ultimately, Adam Neumann is the one who decided to step down. He still controls a majority of the shareholder votes. So forcing him out without his consent would have been inherently challenging. However, Adam Neumann was likely aware that he was losing support, including from SoftBank.

During a meeting with the board on Tuesday, September 24, 2019. The decision was made. In a statement, Adam Neumann said that scrutiny regarding his management of the company and his personal life harmed WeWork.

Going forward, Sebastian Gunningham and Artie Minson, both WeWork executives, are slated to serve as interim CEOs. The company will also begin a search for a new CEO.

It isn’t entirely clear if Adam Neumann’s decision will favorably impact interest in WeWork shares. There are concerns that the company is spending too much, and that it might struggle to turn a profit for the foreseeable future.

Investor Influence

Investor sentiment wasn’t necessarily on WeWork’s side when it came to the IPO. Some seemed concerned about the amount of control Adam Neumann had over WeWork through his special voting shares. However, now that he is stepping down, he will lose a substantial amount of power in regards to the company. Instead of his special shares each representing 20 votes, they will only have three apiece.

Still, Sebastian Gunningham and Artie Minson likely still have a long way to go when it comes to shifting investor sentiment. WeWork may explore slowing its growth with the aim of reducing costs or increasing profitability. Only time will tell how the company may adjust its direction moving forward, and it may take time for enough to occur for investors to feel more confident about its future.

Additionally, if a new CEO is selected, that may have a significant impact on investor sentiment as well. Since that search may or may not be formally underway, it is too soon to tell who WeWork may seek or whether investors will respond positively to the candidates.

WeWork Isn’t Alone

WeWork isn’t the only company to struggle with its IPO. Investors haven’t been as enthusiastic about many IPOs in 2019, including highly anticipated ones like Lyft that didn’t produce the kind of results many analysts expected. As a result, the mood may be pessimistic overall, leading investors to be incredibly cautious before deciding whether to jump on board with a particular company.

This also isn’t the first time a CEO has been effectively ousted ahead of an IPO. In 2017, Travis Kalanick succumbed to the pressure and resigned as Uber’s CEO after issues with the company’s culture became worldwide news. Dara Khosrowshahi, a former CEO at Expedia, moved into the CEO position at Uber.

Do you think the WeWork CEO should have stepped down? Why or why not? Share your thoughts in the comments below.

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Is Your 401K Hurting or Helping You?

September 20, 2019 By Tamila McDonald Leave a Comment

In many cases, the 401(k) is the quintessential retirement plan. If you have access to an employer-sponsored option, it is usually a 401(k). Plus, this form of retirement account has been around for ages, making it seem like an incredibly solid choice. But, while a 401(k) can be a great way to save for retirement, it isn’t always ideal. In some cases, you might actually be better off with an alternative. If you are wondering whether a 401(k) is the best option for your situation, here are some points to consider.

Employer Matches

Many people who have access to a 401(k) through their employer are eligible for an employer match. Usually, that means that the company will make a contribution to the employee’s retirement account up to a certain percentage of the worker’s wages.

For example, if an organization offers a match up to 3 percent of the worker’s salary, and the employee earns $60,000 per year, the company would contribute up to $1,800. If the worker allocates 3 percent of their income to the retirement plan, they end up with their $1,800 contribution as well as another $1,800 from the company, bringing the total to $3,600.

In nearly all cases, contributing enough to a 401(k) to maximize the employer match is smart. The employer’s contribution is essentially free money, so it shouldn’t be overlooked.

However, if your employer doesn’t offer a match, then you might want to reconsider using a 401(k) at all. This is especially true if the plan has very few fund options, and none of those offered meets your needs. In those cases, it might be worth exploring Traditional IRA or Roth IRA options elsewhere, as you can often find a broad range of options, and only turning to your 401(k) after you have hit the IRA contribution limit for the year.

The Income Tax Factor

When you put money into a 401(k), it’s usually pre-tax income. This means you are lowering your tax liability for the year, so you won’t owe as much when you file your federal taxes. Instead, you’ll owe taxes on the cash when you pull the money out during retirement.

Whether a 401(k)s tax advantages help or hurt you depends on your situation. If you are in a higher tax bracket currently than you will be in retirement, then the ability to lower your tax burden now is a benefit, suggesting taxation rates stay similar. You’ll be spending less of your money on taxes overall.

However, if you are going to end up in a higher tax bracket during retirement, then using a 401(k) is actually hurting you. By delaying the taxation on that money, you are going to end up paying more.

Similarly, you usually have fewer tax deductions in retirement as well. For example, you might not have any dependent children living at home once you retire, and you might not be paying a mortgage, causing that interest deduction to disappear. As a result, by waiting to pay taxes on your retirement savings, you could end up owing more even if your income level is similar or even slightly lower in retirement.

If your tax bracket might be higher or deductions significantly lower when you retire, then you’re better paying taxes on your retirement contributions now instead of later. That means a Roth IRA, where your contributions are taxed, but your withdrawals (including on your earnings) are tax-free, might be an alternative worth exploring.

The “Set It and Forget It” Argument

One of the biggest benefits of using a 401(k) is that you can automate your retirement savings with ease. Usually, you simply tell your human resources department how much of your income you want to contribute, and they take care of the rest. Even portfolio selection is typically pretty simple, partially because your options may be very limited.

However, this isn’t necessarily a strong argument against Traditional or Roth IRAs. When you set up an IRA, you usually have the ability to set up automatic deposits into that account. While the money doesn’t come directly out of your paycheck before you receive any cash, it’s essentially the same process. You just have to track the contribution in your budget the same as you would with any other recurring expense. Once you do that, you are all set.

Income Restrictions and Contribution Limits

With a 401(k), your income level doesn’t impact your eligibility. As long as you are with that employer, your salary can get sky high, and you can still contribute. Also, the contribution limits are pretty generous. For 2019, if you are under 50 years old, you could allocate $19,000. If you are age 50 or older, the limit went up to $25,000.

With a Roth IRA, there are income restrictions. For 2019, if you are single, your adjusted gross income (AGI) has to be below $122,000. Otherwise, the amount you are allowed to contribute is reduced. Plus, if your income reached $137,000 or higher, you aren’t eligible to contribute to a Roth IRA at all.

Additionally, Roth IRA contribution limits are lower than with a 401(k). For 2019, you can only contribute $6,000 if you are under the age of 50 or $7,000 if you are 50 or older.

Traditional IRAs don’t have income limits, but there are contribution limits (they are the same as with a Roth IRA).

Selecting the Best Approach

While how you save for retirement is a personal decision, there are a few options that work best for many people. First, if you have access to an employer 401(k) match, then contribute enough to your 401(k) to maximize that benefit. Next, switch over to either a Roth IRA if you are eligible for a Traditional IRA if you are not. Then, if you max out your IRA, move back to your 401(k).

For those who don’t have an employer match, you might be better off starting with an IRA. Both Traditional and Roth versions give you more portfolio options that most 401(k) plans, so you have more control. Plus, if you might have a higher tax burden in retirement, starting with a Roth IRA makes sense if you are eligible. Once your IRA is maxed for the year, then use your 401(k) after that to keep saving.

Either of those options above can be great for retirement planning. However, you want to consider your personal financial situation before you make a decision and thoroughly evaluate your 401(k). Since 401(k) plans can vary significantly from one employer to the next, you need to examine yours carefully before you choose how to proceed. At times, the 401(k) might be enough, especially if you have a lot of investment options to chose from and you are confident that your tax liability will be significantly lower in retirement than it is now.

Do you have a 401(k)? Do you think it is helping you or hurting you? Share your thoughts in the comments below.