The Market is Crazy! Get In, or Get Out?

Posted Leave a commentPosted in Finances, Investing, Stock Market

The title of this post is what I keep seeing and hearing daily. I joked around with some people at work talking about how I was going to pull everything out of the stock market after the President was diagnosed with Covid-19. The funny thing is, while I was joking, other people said that they fully intend to do just that. This reminded me about how important it is to “stay the course” as we say in the Navy.

It has been clear cut to me that time in the market is more important than timing the market. As we continue down this volatile road of uncertainty, it is important that people do not look at market dips as losing money. YOU ARE NOT LOSING MONEY! Your assets are simply losing value.

Now, let’s take a look at the stock market historically…

https://www.seeitmarket.com/comparing-todays-stock-market-with-the-1970s

Some Bumps Along the Way, but Steady Gains

The portion highlighted in yellow are the dips that happened back in the 1970’s. If you look further back, you can see when the great depression happened in the 1930’s. The main thing I want to point out with this graph is simple… Look at the trend even after all of the dips. What does the Dow Jones continue to do? Over the years, it continues going up…

These dips should be looked at as buying opportunities to purchase stocks at a “discounted” price. Your focus should be on the cost average of each stock you purchase versus the most recent price you paid.

What are your goals?

How you invest should depend on your lifestyle and your goals. Day traders and swing like to buy into individual stocks and us several indicators to know when to buy and when to sell. Buy and hold investors like index funds, exchange-traded funds (ETFs), and diversifying individual stocks. I happen to be a fan of index funds and ETFs vice individual stocks. With an index fund, you are getting a piece of every company in that fund. If one particular company tanks, you are still safe. Index funds/ETFs like the Dow Jones above are consistent in constantly gaining value over time. I do buy individual stocks just to play around with, but it’s nothing serious. Most of the individual stocks I buy are not even “stocks” because they are mostly Real Estate Investment Trusts (REIT). I like REITs because they are normally steady in value and have exceptional dividend returns. I don’t even collect the dividends from those as I set all of them in to a dividend reinvestment plan (DRIP) back into the fund to reinvest into the REIT and buy more.

While you don’t have to invest the same way I do, you should most definitely have a strategy with the assets you are investing in. If you are new to investing, I would highly recommend that you speak with a professional or thoroughly research the asset class you are thinking about investing in. I am not a financial advisor and am only posting my thoughts and sharing what I am doing. However, I would be happy to assist you on your financial freedom journey. My email is always open if you want to reach out. Hope you all were able to get something out of this article. Also, be sure to check out our podcast.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

Apple Shares

7,000 Shares of Apple… WWYD

Posted 2 CommentsPosted in Finances, Investing, Stock Market
Apple Shares

If you inherited 7,000 shares of Apple, what would you do?

This is a question A user on Reddit asked the community when he recently inherited 7,000 shares of Apple from his grandfather. Check out the MarketWatch article. Before diving into this post, I would like to express my sincere condolences for the original poster. I would also warn any of my readers before looking up the original Reddit post as there is some strong language in the original post and subsequent comments.

Apple is currently sitting at $498.90 a share. Inheriting 7,000 shares gives him a value of $3,492,300. That’s definitely something to work with. This Reddit user get’s many suggestions and comments on what he should do with his newly found riches. Let me share what I would do if I came into this type of inheritance.

What do I do with these shares?

First, I would cash out most of it except for about $250k (roughly 501 shares). I would keep this large sum as Apple is still a great company and a dominant force in the Tech industry. Since this is inheritance, I should only be taxed on what I’ve gained since inheriting the shares. This means I will pay very minimal taxes if the value goes up before selling it.

After the sale, I would have around $3.25 million. The name of the game is diversity. Spread the wealth. I would put at least $250k-$500k into a few high yield savings accounts as a safety net.

Investing at least $1.5 million in real estate (rental properties) would be my next move. This money would be used for several down payments on single family, multi-family and commercial properties. I would take out mortgages and leverage my debt service to the income I would make from the rental units.

I would invest the last $1-1.5 million in the stock market. Investing mostly in blue chip dividend paying stocks, index funds, and maybe a few REITs. I will already have a bunch of real estate, so maybe no REITs and just other dividend paying stocks.

Related: 6 Ways to Invest in Real Estate

Here is the income I would have just by letting my money work for me.

Having $500k in the savings account you are making roughly $10,000 a year from a 2% rate.

If you do well with your real estate investments and manage your debt service well, you can get around a 25% return. This would be between $250k – $375k a year.

And with that last $1.5 million, let’s say you are averaging a 5% dividend yield, that will give you another $75k a year.

Conclusion

With investing your money properly, you can make close to $460k a year to let that money work for you. I would donate at least 10% of my earnings per year so roughly $46k. As I’ve said on my podcast, I believe it’s important to give back. This is what I would do personally as you don’t want to have all of your eggs in one basket.

Sound off in the comments and let me know what you would do if you inherited 7,000 shares of Apple.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, REALTOR-ASSOCIATE®, Real Estate Investor, and Finance Coach located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.