Number one rule of investing, you must understand your investments. So, this week describe in some detail your investment holdings in clear and concise terms to a family member or good friend. If you can’t explain your investment holdings, you have problems. Remember MoneyYOYO – You’re on your own! You are the CFO of your life and you need to be accountable for your investment decisions.

How do you get started? First, make a list of all the investments you own today. Look at your savings, your retirement funds, and real estate you own or anything else that is part of your investment portfolio.

What assets do you own – cash, stocks, bonds, REITs, mutual funds, ETFs, index funds, target dated funds, etc.? Do you understand what are the underlying investments in your mutual funds, ETFs, REITs or target dated funds?

What is the asset allocation of your investment portfolio or your overall mix of investments in your portfolio?

If you don’t understand those investments then you need to do some research. There is plenty of information out there. There are general financial sites like Yahoo Finance and Google Finance. Your mutual company websites such as Fidelity and Vanguard will provide you with additional information. The brokerage firms such as Schwab and etrade, or other sources such as Motley Fool can be helpful in your research. Be knowledgeable about your investments.

What asset classes do you own such as cash or short- term investments, bonds or fixed income investments, stocks or equities, real estate and other investment classes such as commodities? Calculate the percentage of each of these asset classes in your portfolio.

Determine if each investment is conservative, moderate or aggressive in risk level. Also, determine what is the cost of each investment? What fees do you pay for each investment? Then determine the return of these investments after these costs for a 1, 3 and 5-year timeframe. This is a lot of work, but a necessary step if you are to become an informed investor.

Step one is now completed in starting the process of creating an investment strategy. Now you know a lot more about the  investments you own and what they are.

Next we need to figure out what type of investment strategy you wish to pursue.

Kowalczyk comment: If you enjoy this blog, please Like It and send it along to your friends. You can also follow this blog via Twitter @moneyyoyoblog

 

 

 

 

 

 

 

 

 

 

 

 

Many millennials believe that Social Security will not be around when they are ready to retire, but you are paying FICA or SECA taxes to support this program, so you should be knowledgeable about the current program.  (FICA – Federal Insurance Contributions Act tax) (SECA – Self Employed Contributions Act tax)

Social Security was set up in the 1930s during the depression. There are three programs. Most people know about the retirement program. There are two other programs. One is for disabled workers and another for survivors of workers who die before retirement.   80% of the benefits from Social Security go to people over 62 years old. The other 20% of funds go to the other two programs. Over 4 million children receive benefits from Social Security.

Social Security is 84% funded by payroll taxes paid by you and your employer. 13% of the funds supporting Social Security are sourced from the interest earned on special issue Treasury Bonds in the trust account. 3% of the funds come from taxes paid on benefits received.

The average benefit paid to retirees is $15,144 annually or $1,262 monthly. Currently, the highest benefit payment is $30,396 annually and $2,533 monthly. This tells you that some of you will need additional retirement funds if Social Security is still around in its present form when you retire.

You must work 40 quarters before you are covered by Social Security. Many women in the past did not qualify for this benefit, because they did not work long enough to gain eligibility.

You should pay attention to those bulletins you get from the Social Security Administration. Do they have a record of all your work? It is easier to correct an error when it occurs rather than correcting it in 40 years.

Will Social Security be around when you retire? Who knows, but the program will definitely not be in its current form. The retirement age will continue to lengthen out as we all live longer.   How it is funded and how benefits are paid out will probably change to strengthen the program.

Kowalczyk recommendation: Read this article about the current status of Social Security –   http://www.fool.com/retirement/general/2014/05/24/dispelling-the-greatest-social-security-myth-of-al.aspx#

Kowalczyk further information: www.ssa.gov is the official website of Social Security. This website from AARP gives you a glossary of terms used at Social Security – www.aarp.org

Kowalczyk comment: If you enjoy this blog, please pass the website along to your friends and family.