Tails, You Win

Tails, You Win

Jul 26, 2022 by Morgan Housel

Steamboat Willie put Walt Disney on the map as an animator. Business success was another story. Disney’s first studio went bankrupt. Later cartoons were monstrously expensive to produce, and financed at onerous terms. By the mid-1930s Disney had produced more than 400 cartoons – most of them short, most of them liked, and most of them losing money. Disney and his studio were nearly broke.

Snow White and the Seven Dwarfs changed everything. The $8 million it earned in the first six months of 1938 was an order of magnitude higher than anything the studio earned previously. It transformed Disney Studios. All company debts were paid off. Key employees got retention bonuses. The company purchased a new state-of-the-art studio in Burbank, where it remains today. By 1938 Walt had produced several hundred hours of film. But in business terms, the 83 minutes of Snow White was pretty much all that mattered.

Long tails drive everything. They dominate business, investing, sports, politics, products, careers, everything.

Rule of thumb: Anything that is huge, profitable, famous, or influential is the result of a tail event.

Another rule of thumb: Most of our attention goes to things that are huge, profitable, famous, or influential. And when most of what you pay attention to is the result of a tail, you underestimate how rare and powerful they really are.

Venture capital is a tail-driven business. You’ve likely heard that. Make 100 investments, and almost all of your return will come from five of them; most of your return from one or two.

Correlation Ventures crunched the numbers. Out of 21,000 venture financings from 2004 to 2014, 65% lost money. Two and a half percent of investments made 10x-20x. One percent made more than 20x return. Half a percent – about 100 companies – earned 50x or more. That’s where the majority of the industry’s returns come from. It skews even more as you drill down. There’s been $482 billion of VC funding in the last ten years.

The combined value of the ten largest venture-backed companies is $213 billion. So ten venture-backed companies are valued at half the industry’s deployed capital.

There is a feeling, I’ve noticed, that this low-hit, high-stakes path is unique to VC in the investment world.

I want to show you that it’s not. Long tails drive everything.

The most successful venture-backed companies – the tails – go on to become public companies. And it’s easy to measure how important tail returns are to public markets. Spoiler alert: It’s not much different than VC.

The S&P 500 rose 22% in 2017. But a quarter of that return came from 5 companies – Amazon, Apple, Facebook, Boeing, and Microsoft. Ten companies made up 35% of the return. Twenty-three accounted for half the return. Apple alone was responsible for more of the index’s total returns than the bottom 321 companies combined.

The S&P 500 gained 108% over the last five years. Twenty-two companies are responsible for half that gain. Ninety-two companies made up three-quarters of the returns.

The Nasdaq 100 skews even more. The index gained 32% last year. Five companies made up 51% of that return. Twenty-five companies were responsible for 75% of the overall return.

It’s always like this. J.P. Morgan Asset Management published the distribution of returns for the Russell 3000 from 1980 to 2014. Forty percent of all Russell 3000 stock components lost at least 70% of their value and never recovered. Effectively all of the index’s overall returns came from 7% of components. That’s the kind of thing you’d associate venture capital. But it’s what happened inside your grandmother’s index fund.

You can drill this down even more.

Amazon drove 6.1% of the S&P 500’s returns last year. And Amazon’s growth is almost entirely due to Prime and AWS, which itself are tail events inside a company that has experimented with hundreds of products, from the Fire Phone to travel agencies.

Apple was responsible for almost 7% of the index’s returns. And it is driven overwhelmingly by the iPhone, which in the world of tech products is as tail-y as tails get.

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/tails-you-win/

Why You Shouldn’t Keep Your Cash Under the Mattress

Why You Shouldn’t Keep Your Cash Under the Mattress

Valencia Higuera   Mon, July 25, 2022

If you don't know much about money, you don't have to look far for advice. You can always learn from personal finance articles, books and videos or money-savvy friends and family.

Although there's no short supply of guidance, money rules can shift over time. For that matter, some old-school advice should be taken with a grain of salt.

Pay Off Your Mortgage Early

Most people need a mortgage to purchase a home. However, financing a house entails paying thousands of dollars in interest. To reduce interest charges, some borrowers come up with a plan to pay off their mortgages early by making extra payments.

This advice isn't bad in itself, but according to Paul Moyer, the founder of SavingFreak.com, this advice doesn't make the same financial sense in our current low-interest environment as it did when mortgage rates were higher, like 6% to 8%.

"Those extra payments can do more work for you by being placed in other investments," Moyer said. "Even if you only get 6% over the life of the investment, you will beat the interest you are paying on your home mortgage."

You Can Buy a House You Can't Afford -- Just Get Roommates

Taking in a roommate or two can be a financially savvy way to save money, but never purchase a home if you can't afford to make the mortgage payments yourself. Roommates come and go, so you can't rely on them to pay off your home loan. And defaulting on a mortgage will ruin your credit and could result in foreclosure, making it hard for you to take out loans and buy another home in the future.

Prioritize Saving For Your Child's Education

Some parents believe it's their responsibility to pay for their child's college education. The problem, however, is that some people save for their child's college education at the expense of saving for their retirement. Rather than sock all your money away for college tuition, David Walters, a CPA and certified financial planner with Palisades Hudson Financial Group, encouraged prioritizing retirement.

"I often need to remind (parents) that you can finance your child's education with college loans and other funding sources, but you can't finance your retirement, so a balance is needed," said Walters. "This is even more important for parents with children at or close to college age, as their time horizon for retirement is much shorter."

Use a Money Transfer Company To Send Cash

To continue reading, please go to the original article here:

https://news.yahoo.com/why-shouldn-t-keep-cash-143210325.html

11 Social Security Mistakes That Can Cost You a Fortune

11 Social Security Mistakes That Can Cost You a Fortune

GOBankingRates  Gabrielle Olya   Thu, July 21, 2022

Whether you're counting on Social Security to fund most of your retirement income or supplement it, you want to make sure you get all of the money you're entitled to. However, with so many ways to claim benefits -- especially if you're married or used to be married -- small mistakes could end up costing you a lot of money over the rest of your life.  By knowing which Social Security mistakes to avoid, your retirement will be easier to handle -- even if you aim to retire early.

The Mistake: Not Checking Your Earnings Record

Even if you're decades away from claiming Social Security, you could be making a big mistake if you don't keep track of your yearly earnings.

The amount of Social Security benefits you receive depends on your earnings record, so if that record is incorrect, you might not receive the benefits you're entitled to.

Errors can occur for a variety of reasons, including an employer reporting an incorrect amount of earnings or your earnings not showing up because you got married or divorced and your name change has not been processed correctly.

What To Do: Check Your Social Security Statement While Working

To avoid losing money due to errors in your earnings record, check your statement annually. If you notice errors, gather proof of your earnings to send to the Social Security Administration, such as your W-2 or pay stubs. Once the Social Security Administration has verified your claim, it will correct your record.

It's much easier to prove an error that happened the previous year, when you still have your records handy, than it is for 10, 20 or more years ago because you probably don't have a paper trail going back that far.

The Mistake: Not Working Long Enough

To qualify for Social Security retirement benefits, you need at least 40 work credits. You can earn up to four credits each year based on your earnings. For 2019, you must earn $1,360 to get one credit, or $5,440 to get the maximum of four credits.

In addition, your benefits are calculated based on the average of your 35 highest-earning years. If you have fewer than 35 years of earnings, $0 will be averaged in for each year you don't have earnings.

What To Do: Do the Math Before Retiring

As you're approaching retirement, check your earnings statement first to make sure you have enough credits to qualify for Social Security. If you don't already have 35 years of earnings, consider whether working an additional year or two could help boost your Social Security benefits.

To continue reading, please go to the original article here:

https://news.yahoo.com/11-social-security-mistakes-cost-160102171.html

Money Stress Is Linked to Poor Financial Wellness

Money Stress Is Linked to Poor Financial Wellness, Advisors Can Help

Wola Odeniran  Fri, July 22, 2022

New research from T. Rowe Price shows that your level of financial stress can connect with your financial wellness. In fact, retirement plan participants who report stress related to debt are saving less for retirement than those who are not stressed. Let's take a look at how money stress can be a sign of poor financial wellness.

A financial advisor could help you create a financial plan to get on a stress-free path to managing your money.

Retirement Plan Participants Are Stressed About Money

T. Rowe Price says that your path to a successful retirement starts with financial wellness. This includes paying your bills on time, being prepared for emergencies, and making sure you have access to information and tools that can track your financial decisions and hold you accountable.

But research from the global investment firm shows that retirement plan participants are stressed about debt. And this is causing them to save less than those who are not stressed. The research shows that stress stems from several financial factors, including debt, budgeting and health care expenses.

According to the study, 33% of respondents are struggling to stick to their monthly budgets. Roughly one-third of those with student loan debt are having issues repaying it. And 20% of respondents are similarly struggling to pay off credit card debt or home equities.

Research also shows that this financial stress is taking a toll on young folks, women and racial minorities.

Among survey participants, 73% of workers age 30 and younger reported moderate to high levels of stress related to budgeting, while only 40% of older workers age 50 and older reported the same stress.

Research also shows that women are 26% more likely than men to experience higher levels of financial stress, specifically as it relates to debt, budgeting, nonretirement savings and health care expenses.

When it comes to race, the study found that Black and Latino workers are 34% and 40%, respectively, more likely to experience higher levels of debt-related stress than white workers.

Overall, 25% of respondents believe they will have to lower their standard of living in retirement.

How High Financial Stress Predicts Financial Wellness

To continue reading, please go to the original article here:

https://news.yahoo.com/money-stress-linked-poor-financial-153548429.html

Inflation Money Tips: Top Advice for Saving and Spending

Inflation Money Tips: Top Advice for Saving and Spending

GOBankingRates   Andrew Lisa   Thu, July 21, 2022

The bad news for anyone whose budget is struggling to keep up with rising prices is that inflation is not yet starting to cool. While things appeared to be moving in the right direction in April, May inflation spiked again and got worse in June.

"Inflation is over 9% right now so everything is more expensive," said personal finance expert and "Crawl Before You Ball" author Buffie Purselle. "Food, gas, water — everything you need to live. The reality is that there is very little room in anyone's budget for wants right now."

Purselle is not incorrect, but that doesn't mean there aren't things you can do to take the sting out of these tough economic times while waiting for prices to fall back down to Earth.

Write It Down and Visualize

It's hard to imagine that there's a personal finance expert on Earth who advises against creating a budget and a household spending plan, but they usually say to pick the app or software that works best for you. At least one expert, however, wants you to do it the old-fashioned way. "My biggest piece of advice for individuals looking to gain a strong financial footing in this uncertain economic environment is to write everything down," said Lisa Fischer, chief growth and lending officer of the fintech company Mission Lane.

"Whether it's scribbling in a notebook or typing out an organized list, keeping a detailed record helps you visualize your cash flow and cut down where needed. "Amid the current inflationary period, this will help individuals keep an eye on rising costs and spending within the necessity and luxury expense categories."POLL: Do You Have a Side Gig or Other Hustle?

You Know What's Inflated? Your Recurring Subscriptions

If you take Fischer's advice and write your budget out by hand, you'll probably notice that you're writing some variation of the same thing over and over and over again. "Get rid of those eight or nine different subscriptions," Purselle said. "It's the first thing to go. Get rid of those charges you get every month for apps you don't use and you don't necessarily need. It's not about just not going to get coffee — those small amounts and subscriptions add up. And once you put that money back in your budget, put it in your savings."

Match Your Investments to the Moment

Interest rates are rising, which makes money more expensive to borrow, but it's probably safe to say that your savings account yield has barely ticked up only a little, if at all. The good news is that you can move your money to savings vehicles designed with inflation in mind. "Two such tools are TIPS — Treasury Inflation-Protected Securities — and Series I Savings Bonds," said Maya Nijhawan, co-founder and COO of Finch Credit.

"Both are designed to help protect your money from inflation, but they have their own nuances. Before you hit the buy button, make sure you understand all the terms and conditions."

To continue reading, please go to the original article here:

https://www.gobankingrates.com/money/financial-planning/top-money-advice-for-periods-of-inflation/?utm_campaign=1174515&utm_source=yahoo.com&utm_content=11&utm_medium=rss

11 Ways Warren Buffett Lives Frugally

11 Ways Warren Buffett Lives Frugally

GOBankingRates  By Amanda Garcia     Wed, July 20, 2022

Trying to build your savings, pay off debt and make the most of your money? You might want to try living like a billionaire — but only if that billionaire is Warren Buffett. The investor — known as the Oracle of Omaha — is the CEO of Berkshire Hathaway. But there's more to this American business magnate than just his job.

Despite his roughly $125.1 billion net worth, according to Forbes, the eight-wealthiest man in the world enjoys a life of simple taste, frugal living and generous philanthropy. Here's a look at Warren Buffett's tips for living frugally.

Despite his roughly $125.1 billion net worth, according to Forbes, the eight-wealthiest man in the world enjoys a life of simple taste, frugal living and generous philanthropy. Here's a look at Warren Buffett's tips for living frugally.

Warren Buffett's House Is the Same One He Bought in 1958

Billionaires live in mansions, right? Not Buffett. He lives in the same residence in Omaha, Neb., that he bought in 1958 for $31,500, the equivalent of roughly $285,000 in 2020 dollars. Buffett has no intention of putting his own home up for sale. "I wouldn't trade it for anything," he told CNBC earlier this year.

POLL: Do You Think You Will Be Able To Retire at Age 65?In today's money, Buffett would have paid about $43 per square foot for the 6,570-square-foot home. But these days, the home is worth about $161 per square foot, according to the home's current value listed by the tax assessor's office in Douglas County, Nebraska, where Buffett lives.

If you want to live like Buffett, consider buying less home than you can afford. Instead of paying pricey mortgage payments, you'll be able to put more of your money toward savings, retirement or vacations. And if you must take out a loan, perhaps get a 30-year mortgage — it's "the best instrument in the world," Buffett told CNBC.

In fact, Buffett took out a 30-year mortgage in 1971 when he bought a vacation home in Laguna Beach, California. "If you're wrong and rates go to 2%, which I don't think they will, you pay it off," he said. "It's a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you've got a one-way bet."

Buffett Starts His Day With a Cheap Breakfast

You might assume billionaires brunch at the most extravagant restaurants, ordering eggs Benedict and bottomless mimosas. Or, they hire a personal chef who can whip up whatever and whenever they want — right? Wrong. Adopting Buffett's lifestyle doesn't include paying high prices for daily gourmet French toast prepared in the comforts of your own home. When it comes to food, the billionaire investor has been known to save money by taking the fast-food route.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/11-ways-warren-buffett-lives-173001606.html

Little Ways The World Works

Little Ways The World Works

Jul 20, 2022 by Morgan Housel

If you find something that is true in more than one field, you’ve probably uncovered something particularly important. The more fields it shows up in, the more likely it is to be a fundamental and recurring driver of how the world works.

Take two topics that seemingly have nothing to do with each other: goldfish and tech companies. Take two groups of identical baby fish. Put one in abnormally cold water; the other in abnormally warm water. The fish living in cold water will grow slower than normal, while those in warm water will grow faster than normal.

Put both groups back in regular temperature water and they’ll eventually converge to become normal, full-sized adults.

Then the magic happens.

Fish with slowed-down growth in their early days go on to live 30% longer than average. Those with artificial super-charged growth early on die 15% earlier than average.

That’s what biologists from University of Glasgow found.

The cause isn’t complicated. Super-charged growth can cause permanent tissue damage and “may only be achieved by diversion of resources away from maintenance and repair of damaged biomolecules.” Slowed-down growth does the opposite, “allowing an increased allocation to maintenance and repair.”

“You might well expect a machine built in haste to fail quicker than one put together carefully and methodically, and our study suggests that this may be true for bodies too,” one of the researchers wrote.

The same thing has been found in humans. And in birds. And in rats.

And isn’t it the same in business?

Chamath Palihapitiya once noted that however fast your business grows, that’s the half-life for how quickly it can be destroyed. So many companies, flush with cheap money from previous years, are learning this right now. Every business and every industry has a natural growth rate – push beyond it and short-term growth comes at the cost of long-term quality, and eventually survival.

When the limits of fast growth impact goldfish and rats the same way it limits tech companies, you know you’ve found an essential part of how the world works, and will continue working in the future.

John Muir once said, “When we try to pick out anything by itself we find it hitched to everything else in the universe.” Fields are studied individually, but there are so many common denominators across topics. The more fields a lesson applies to, and the more disparate those fields are, the more powerful and important the lesson becomes.

It might sound crazy, but once you understand the basic principles of your profession, you might gain more expertise by reading around your field than within your field. Connecting dots between fields helps you uncover the most powerful forces that guide how the world works, which can be so much more important than a little new detail that’s specific to your profession.

And if you look hard enough, there are so many dots to connect.

Here’s another.

Part of the second law of thermodynamics is that you get the most efficiency out of a system when the hottest heat source meets the coldest sink – that’s when an engine will waste the least amount of heat, converting as much energy into power as it can.

And isn’t it the same in business and careers?

A genius entering a crowded and competitive field may find a little success, but put her in a “cold” industry full of idiots and she’ll create a monopoly, destroying competitors. Jeff Bezos famously said “your margin is my opportunity,” which is the same concept. The biggest opportunities happen when a hot talent meets a cold industry. Thermodynamics has proven this since the beginning of the universe – no one should doubt how true and powerful it is.

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/little-ways-the-world-works/

You’re In Charge Of You.

You’re In Charge Of You. Not Secretary Pete. Not Hunter Biden’s Dad

Notes From the Field By Simon Black  July 11, 2022

Richard of Bordeaux was just a scared, ten year old boy in the summer of 1377 when his grandfather passed away.   This should hardly have been historically relevant. But in Richard’s case, his grandfather was King Edward III who had ruled England for more than 50 years.

Edward III had been highly unpopular and faced steep political opposition towards the end of his reign. And leading up to his death, Edward’s opponents among the nobility sought to consolidate their own power and install a new monarch that they could control.

So they plotted to install young Richard to the throne. Even though Richard would technically be King, the nobles would be calling the shots behind the scenes.

And so, on July 16, 1377, nearly 645 years ago to the day, the boy was whisked away to Westminster Abbey and crowned King Richard II under the watchful eyes of the new Regency Council.

The nobles wasted no time in appointing themselves to positions of high authority. After all, England was in extreme turmoil and in desperate need of their courageous leadership and expertise. They and they alone could save England from the depths of its crises.

And crises there were many.

The English treasury was depleting rapidly, thanks in large part to the endless Hundred Years War that had been raging for decades.

But most notably, recurrent outbreaks of the Bubonic Plague had ravaged the kingdom, with some cities having lost as much as 50% of their populations.

The pandemic (which we now call the Black Death) caused labor shortages and nasty inflation across the country.

So the expert nobles sprang into action with all sorts of idiotic rules and regulations. They raised taxes, they reduced freedom, they tightened feudal restrictions, and they tried to centrally plan economic output.

But none of their expert solutions worked, and by the autumn of 1380, England’s economy was in even worse shape.

International trade had practically collapsed. England was on the verge of defaulting on its debt. And the war was going very poorly for England; it turned out these expert nobles were pitiful military strategists, and France had seized the advantage.

So in November 1380, the experts convinced parliament to pass another tax-- a ‘head’ tax, which essentially meant that everyone in the kingdom had to fork over a fixed sum of money to the government simply for the privilege of being alive.

And this was the second such head tax that the experts had passed in as many years. 

Needless to say it didn’t go over well with the people.

Serfs began to unionize and go on strike. Peasants outright refused to pay the tax. The nobles mobilized to stop them, sending magistrates across the countryside to arrest dissenters.

Within a few months, a full-blown uprising had broken out; it’s now known to history as the Peasant’s Revolt of 1381.

And it spread rapidly. By June 1381, riots were taking place across England. And they were anything but ‘mostly peaceful’.

Thousands of people were killed in the violence, and mobs tore down entire palaces. But in the end, government forces managed to put down the rebellion, and the rebel leaders were quickly executed.

None of the experts, of course, ever faced charges. Their corruption, incompetence, and profligate spending were all overlooked.

We’ve seen this story over and over again throughout history-- horrible leadership engineering major crises.

Quite often we blame the actual ruler in charge. Ancient Rome, for example, is packed with terrible emperors who share responsibility for the demise of the empire.

But it’s rarely just one person who creates all the turmoil. And we often forget key officials within government who drive so much chaos.

Richard II was just a stooge. Sure, he was officially the King. But ‘expert’ ministers were making all the decisions, and they proved to be some of the worst ever assembled in the history of government.

It’s hard to not notice the obvious parallels to our own times, and to see our own government filled with the same idiot savants that plagued the cabinet of Richard II.

Over the weekend I watched a recent interview with US Transportation Secretary Pete Buttigieg, the man who has presided over historic airline chaos, including record flight cancellations, delays, lost baggage, airport wait times, etc.

He’s also played a major role in mucking up the supply chain, given that the nation’s seaports, trucking, etc. fall within his domain.

Secretary Pete, of course, has been out to lunch throughout most of this.

But the interview he gave (which took place in April) gives an extremely revealing view of his mindset.

He explained to his host that his Department was in charge of spending nearly $1.2 trillion that had been authorized by Congress in the 2021 infrastructure bill.

“The main thing I’m thinking about,” said Secretary Pete, “is how do we make sure we take all this money, this $1.2 trillion… and actually deliver $1.2 trillion of value?”

Ummm… shouldn’t spending $1.2 trillion on roads and bridges provide AT LEAST $1.2 trillion worth of roads and bridges?

Seriously, how terrible are these infrastructure projects if he’s worried about not achieving enough value to even justify their costs?

Does Pete also go to the grocery store and worry, “How can I spend $100 in this store and walk out with $100 worth of groceries?”

You’d think he would be striving to achieve a 10x return on that infrastructure money. But no. Pete is trying to figure out how to get 1x.

To these people, it’s a monumental achievement to NOT squander the majority of funds entrusted to them by taxpayers.

And that’s ultimately why we cannot rely on them to fix their own mistakes.

The people in charge have engineered so many problems. They are responsible for everything from inflation and economic malaise, right down to the baby formula shortage.

And it’s not just one person shaking hands with thin air. It’s the clueless, astonishingly incompetent cadre below who consistently make things worse.

The good news is that while you cannot depend on government officials to ride to the rescue, you can rely on yourself.

I don’t mean for that to be a cheesy cliché. Sure, if taking United Airlines from Houston to New York, you still have to deal with Secretary Pete’s incompetence.

But we do have much more control over our lives and livelihoods than they want us to realize.

Even with these lunatics in charge, we have tremendous power over our own prosperity, our health, our children’s education, and more.

There are still oceans of opportunity in the world-- job opportunities, business opportunities, investment opportunities, lifestyle opportunities, etc.

Bottom line: you’re in charge of you. Not Secretary Pete. Not Hunter Biden’s dad. Not anyone else. And you don’t need to allow yourself to become a victim to their ineptitude.

To your freedom,  Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/youre-in-charge-of-you-not-secretary-pete-not-hunter-bidens-dad-35851/

Capital Gains Tax 101: Basic Rules Investors and Others Need to Know

Capital Gains Tax 101: Basic Rules Investors and Others Need to Know

Orla O'Connor, Principal, Tax   Mon, July 18, 2022

Billionaire business owner Warren Buffett once famously commented that his secretary paid taxes at a higher rate than he did. Although there are surely many factors at play – among them Buffett's intentionally low salary and his large charitable donations – a big part of the story is that Buffett earns a relatively large share of his income from capital gains.

Income in the form of capital gains has historically been taxed at substantially lower rates than ordinary income like wages, tips, unemployment compensation, gambling winnings, and the like. That's because capital investments are generally viewed by policymakers as engines of growth that stimulate the economy.

The lower tax rates are designed to encourage this beneficial activity. And it's not just the buying and selling of stocks and bonds that receive favorable capital gain treatment. The lower capital gains tax rates apply to profits from other types of investments as well, like the capital gain from the sale of real estate (including your home) or even a small business.

Since the capital gains tax applies to so many types of investment transactions, it's an important piece of the overall tax picture for millions of Americans. But most people don't know much about the capital gains tax – or certainly don't know enough to make informed investment decisions based on the tax consequences of their actions.

The following guide will help you understand the basic rules for the federal capital gains tax. It covers a variety of topics, including what are capital gains, when they're taxed, how to calculate your gain, and what tax rates apply. It also identifies IRS reporting requirements and provides tips for taking advantage of the preferential rates. It's not a substitute for sound professional advice, but it will help investors of all sorts understand the general capital gains tax framework and identify areas where professional help is needed.

What are Capital Gains?

Capital gains are the profit you make from selling or trading a "capital asset." With certain exceptions, a capital asset is generally any property you hold, including:

Investment property, such as stocks, bonds, cryptocurrency, real estate, and collectibles; and

Property held for personal use, such as a car, house, or home furnishings.

There are, however, various special rules that may affect your property's classification or treatment as a capital asset. For instance, if you sell frequently to customers, your property might not be treated as a capital asset. Instead, it may be considered business inventory – and profits from the sale of inventory aren't taxed as capital gains. So, watch out if you sell too many Gucci handbags or real estate investment properties, as these may be treated as inventory, and the tax on any gains will be at the higher ordinary income tax rates.

Similarly, if you sell or exchange depreciable property to a related person, your gains will be taxed as ordinary income.

In addition, intellectual property (e.g., a patent; invention; model or design; secret formula or process; copyright; literary, musical, or artistic composition; letter or memorandum, etc.) is not considered a capital asset if it's held by the person who created it or, in the case of a letter, memorandum or similar property, the person for whom it was prepared or produced.

Plus, although real or depreciable property used in a trade or business is not a capital asset, gains from the sale or involuntary conversion of them may nonetheless be treated as capital gains if they were held for more than one year. So, for all practical purposes, this type of business property is treated as if it was a capital asset.

When are Capital Gains Taxed?

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/capital-gains-tax-101-basic-094206350.html

Take These 6 Key Steps Today to Retire a Millionaire

Take These 6 Key Steps Today to Retire a Millionaire

Looking to retire comfortably? Take these steps now.

ADAM MCFADDEN | May 1, 2022 | Updated July 6, 2022

GOBankingRates maintains editorial independence. While we may receive compensation from actions taken after clicking on links within our content, no content has been supplied by any advertiser prior to publication.

Retiring as a millionaire is the dream of many Americans, and while a million dollars isn’t what it used to be, that level of wealth would make retired life comfortable for many. The good news for you is that this goal is achievable, especially if you have plenty of time before retirement.

Retiring a millionaire is simple, but not easy. The key? Act right now.

1. Find The Right Expert For Your Situation

Sure, you can search for financial advice online, but it’s never going to be specific to your financial situation. The best option will always be an experienced professional who can look at your finances and advise you on what to do. But who has time to sift through thousands of advisor profiles?

WiserAdvisor does all that work for you, matching you to the best financial advisor for your specific situation so you get in an expert in the areas you need.

There’s no cost to you and no obligation to hire the advisor, so there’s not much to lose. Plus, WiserAdvisor screens advisors to make sure you’re only getting the best experts.

Find the best expert for free.

2. Start Saving ASAP

It’s never too early (or too late!) to start saving for retirement. The sooner you start saving, the sooner you’ll be able to invest and have your money going to work for you. You could retire a millionaire a lot faster if you throw more money into these accounts sooner.

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15 Mistakes That Deplete Your Wealth

15 Mistakes That Deplete Your Wealth

Cynthia Measom  Fri, July 15, 2022

Proper planning is crucial when it comes to your finances -- not only for the decisions that can affect your wealth now but also for those that will influence your bottom line long term. But knowing how to make the best financial decisions isn't innate. And if you don't fully understand how to manage your finances, you're likely to make mistakes that can take your net worth from well-cushioned to barely getting by -- or force yourself to stay stuck in a constant financial struggle.

The good news is that the longer you have until your target retirement date, the easier it will be to recover from financial blunders, but what if you could avoid money pitfalls altogether? Take a look at these 15 mistakes that deplete your wealth so you can sidestep them and achieve personal financial freedom.

Proper planning is crucial when it comes to your finances -- not only for the decisions that can affect your wealth now but also for those that will influence your bottom line long term. But knowing how to make the best financial decisions isn't innate. And if you don't fully understand how to manage your finances, you're likely to make mistakes that can take your net worth from well-cushioned to barely getting by -- or force yourself to stay stuck in a constant financial struggle.

The good news is that the longer you have until your target retirement date, the easier it will be to recover from financial blunders, but what if you could avoid money pitfalls altogether? Take a look at these 15 mistakes that deplete your wealth so you can sidestep them and achieve personal financial freedom.

Not Updating and Adhering to Your Budget

If you're interested at all in building your wealth, you already know how important it is to create a budget. However, if you don't adjust your budget frequently based on your current income situation, your old budget isn't doing any good. Mark your calendar to adjust your budget every six months, or whenever you have a career change. This way, you can update your savings goals, make sure your paying down debt if you have it and make bigger contributions to your savings if that's available to you.

Investing Blindly

Brian Stivers, investment advisor and founder of Stivers Financial Services, said that one of the biggest mistakes that depletes wealth is investing in areas you have no experience in or don't truly understand.

"The media and internet are filled with fringe investments that promise great wealth with little risk," he said. "Yet, many of these are extremely aggressive and have a substantial downside. It is important for those who are accumulating wealth or have already accumulated wealth to make sure they fully understand the risk involved in any new investment and how that investment works. For most investors, it makes more sense to stay with traditional investment strategies that are easy to understand and have a long track record of success."

Buying New Cars Frequently

You might think that because you have the money, buying a new car every few years isn't a huge problem. However, this practice can really bring down your net worth. Unless you're paying the full amount for your car in cash, you're adding another payment, or debt, to your portfolio. If you get a loan to buy the car, you're paying interest on something that is actively depreciating in value. Try to only buy a new car when you need to, and pay it off as soon as you can.

Ignoring Your Interest Rates

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/15-mistakes-deplete-wealth-180001302.html