Jason Hartman Foundation » Blog Articles

Stock Picks for Movie Freaks

The Young Wealth Team — Mon, 06 Sep 2010 17:49:14 +0000

While we don’t suggest sinking a sizable part of your portfolio into the stock market for reasons we’ve enumerated obsessively in past blogs, sometimes it might be fun to invest in companies with a link to the film industry. Remember, we’re not into stock picks, so a blind baboon might be better at this game. Keep your performance expectations low and this could be great dinner party conversation, especially when a stinker of a movie release effects your bottom line.

Sony Corp. (SNE)
Is there anything in the entertainment industry that Sony isn’t dabbling in? They’ve got electronics, video games, entertainment, and financial sectors covered. Products like PlayStation, high-definition televisions, computers, digital cameras, and much more. This market variety provides built in diversity and stock price protection for when Adam Sandler releases “You Don’t Mess With The Zohan II.” Please, God, we’re just kidding. Don’t let the day ever come when he does that.

Carmike Cinemas (CKEC)
Or you could take a different approach with your stock picks and invest in a company that actually shows the movies. Carmike controls a total of 2,350 screens through a combination of ownership, partnership, and leasing. And here’s a weird little but not unexpected factoid. Recessions don’t normally effect movie attendance that much. When real life gets to be a drag, people don’t mind raiding the dog food fund to pay for an evening at the movies.

Regal Entertainment Group (RGC)
Or you might want to aim your stock picks at Regal, the largest theater owner with 6,385 screens. Even better, in these days of vanishing stock dividends, Regal pays a not too shabby 6.8 % to shareholders. Not too shabby! Wait, we already said that.

There you go movie aficionados. Don’t say we never gave you any completely unqualified stock picks. Enter positions at your own risk. However, if you decide you’d like to actually have a good chance of making profits with your investments, we have another idea – income property!

The Young Wealth Team

Flickr / fauxto_digit

The Power of Investing Young and Following Albert Einstein’s Advice

The Young Wealth Team — Sat, 04 Sep 2010 12:57:22 +0000

The renowned physicist, Albert Einstein, may or may not have given the world the following quote: “Compound interest is the most powerful force in the universe.” Whether or not Mr. Relativity spoke those words or someone attributed them to him, investing young and doing just that will go a long ways toward building the kind of wealth that financial independence is made of.

The concept of compound interest is simple. No matter the asset you invest in, take the profit every year and, rather than running out to buy an iPad and drawer full of video games, turn around and plow it right back into the investment. Let’s assume an anemic 5% rate of return. After 5 years an investment of $20,000 has grown to $25, 525. After 10 years $32,577. After 20 years $53,065. And that’s without ever adding another cent to the pot above what you’re making in profit from the initial investment.

If you decided to add an additional $1,000 per year over that two decade span of time, you’d end up with $85,000 for your $40,000 investment. Pretty darn good, even assuming a terrible rate of return and very little follow up investing. The idea of compounding interest is why you need to start investing young. Most people spend their lives working hard for their money. The smart ones figure out how to make their money work hard for them. The magic of compounding interest is one way to go about it.

Another benefit to the reinvesting of dividends strategy is that you pay no tax on the dividends when you do so and most brokers will do it at no charge. They want more money in your account because it means more for them to skim with fees. If investing young can be this good with mediocre assets like stocks, imagine the possibilities with a standout asset like real estate.

The Young Wealth Team

Flickr / mansionwb

Money Management Might Mean Don’t Loan To A Friend

The Young Wealth Team — Thu, 02 Sep 2010 13:42:21 +0000

In these stormy economic times, you might be called upon by a friend in crisis for a loan. Young Wealth would normally say “Bad idea!” at the top of our voices and remind you that doing so would qualify as dicey money management on your part. There is, however, one situation where we don’t think this kind of loan is risky. We’ll get into that later.

It’s not that loaning money to a friend is always a bad idea. After all, you may have a better idea about their propensity (or lack of) for paying off debt incurred. Actually, you should put on your banker’s hat when considering the request. Maybe it’s a loan to get out of debt, cover the month’s rent or open a business. Maybe it’s your friend’s money management skills that should be called into question. Do you believe it’s a one time occurrence or is there evidence of a continuing pattern?

If it’s a pattern, you might not want to get involved. After all, it’s easy to tell a little white lie and claim financial exhaustion yourself from “unexpected” expenses. But it’s long been an American tradition to turn to friends and family when economic times get tough. It’s part of the informal economy. Do a good favor and it might be returned down the road.

The downside is that there is a distinct possibility the money will never be paid back. Keeping that in mind, we suggest that any money you decide to loan to friends or family should be considered a gift. Don’t expect to ever get it back and don’t get touchy if you never see it again. Better not to lose a friendship over a little money. If you can’t afford to never have it paid back, you can’t afford to loan it in the first place. That’s real money management.

‘Nuff said.

The Young Wealth Team

Flickr / kevindooley

Introducing COLA to Your Financial Education

The Young Wealth Team — Tue, 31 Aug 2010 19:21:51 +0000

In case your school forgot to include this in a financial education lesson plan, we’ll introduce COLA to you right now. COLA is an acronym that stands for Cost Of Living Adjustment and is an annual figure calculated by the government that measures how much inflation has gone up in the past year. But we don’t care about inflation, right? It doesn’t really have an effect on anything. Wrong. It has everything to do with your purchasing power and ability to create wealth through investing.

Assume that each year brings at least some amount of inflation, which causes a decrease in your purchasing power. For every rise in inflation, there is a corresponding drop in the value of a dollar. That’s why the idea of the COLA is critical to those living on fixed incomes, like retirees. But how does the COLA apply to a young whippersnapper just out of school?

Pay attention. Here comes another financial education lesson plan that was probably neglected by your school. It has to do with investments. At the end of the year, when you add up your total return on investment, it had better be higher than the COLA or you’re not making any money at all. Here’s an example. The government reports an annual increase in inflation that is usually around 5%, a laughable number, in our humble opinion. We believe it’s more like 10% or maybe even higher.

The point is that if you have a mutual fund that performs at a decent rate and returns about 10% per year, you’re only breaking even. Yes, the number of dollars in your account might be increasing but, in terms of purchasing power, unless you’re making more than the real inflation rate of 10%, you’re not coming out ahead. You’re actually losing money by investing, even if it shows a profit on paper.

What you need is an investment asset that profits in the face of inflation. Don’t think it exists? Wrong. Real estate investors who employ an income property strategy correctly could see annual returns in the 20% to 30% range, a high enough level to overcome inflation.

The Young Wealth Team

Flickr / Stefan

The Cornerstone of Youth Investment

The Young Wealth Team — Mon, 30 Aug 2010 17:32:48 +0000

We’re not going to recommend a single stock, bond, mutual fund, or commodity to you today but this topic still is critical to getting your youth investment off to a rousing start. Beginning investors often get tied up trying to analyze and understand 100 different stocks all at once. Nothing wrong with this if you have plenty of free time but at Young Wealth we assume you do have other interests in life besides permanently burying your nose in the Wall Street Journal.

We’re talking concepts here. In almost any educational endeavor, get the concepts right and the rest follows naturally. The concept at hand is universal demand. Learn it, live it, put it in your youth investment tool box for safekeeping. Universal demand can be defined as those items humans can’t live without. Notice we didn’t say “don’t want to live without.” It’s true you (and 12 kazillion other people) don’t want to do without an iPad but the truth is life will continue in the absence of one.

Examples of true universal demand items are food, water, shelter, clothing. These things will always be in high, consistent demand because we must have them. Perhaps food is the biggest universal demand item of all. Unfortunately, to invest in it requires you buy stock from Wall Street or a commodity exchange brokerage. Recent years have shown that the stock market is one of the least effective mechanisms through which to invest. Learn it now or learn it later. Now is preferable. Too much of your money is siphoned away through administrative fees and commissions.

Let’s look elsewhere to invest in a universal demand product. We suggest you consider shelter for your youth investment dollar, specifically shelter in the form of houses which can be rented to tenants, or what is called in the industry “income properties.” Great appreciation plus cash flow. Don’t try that with the stock market. With income properties you also cut out the middleman and administrative fees.

Trust us, the concept of universal demand can make you a lot of money.

The Young Wealth Team

Flickr / cote

Set (And Reach) Realistic Personal Money Management Goals

The Young Wealth Team — Thu, 26 Aug 2010 18:21:16 +0000

Realizing you need better personal money management skills is the first step for most young adults, especially after four college years of nabbing pennies off the sidewalk just to immediately blow the whole wad on beer and fast food tacos. Doesn’t sound right? Our apologies if you were the odd duck who grasped the idea of control from the beginning. Most of us still don’t get the importance of telling our money where to go and not vice versa.

A post-graduate real job entails regular income. Great! But what if you still treat your paycheck like free money found on the sidewalk. Disaster! You’re eating out every meal for a week and now the money’s gone – with rent due tomorrow. Trust us, kiddies, it happens. To avoid this troubling scenario, you need to learn personal money management skills, a concept likely skipped over at every institution of education you attended. Just like Adam Lambert didn’t learn to sing in a day, you shouldn’t panic at your lack of control over finances and put yourself on an ironclad responsibility regimen all at once.

If you can do it cold turkey, that’s great. For many, it’s a recipe for failure. Most need to ease into the adult life of budgeting slowly, to get acclimated. The first step (we’ve been here before, people) is to write down every single cent you spend for an entire month and then, at the miserable end, pull it out and analyze the bloodbath. You might well discover that 95% of your income goes to video games and shaken green tea from Starbucks. What’s left for rent, gas, insurance, and emergencies? Ring ring…”Hello, Dad? Mikey here. I’m a little short this month…”

Get started on the journey to real personal money management by creating a realistic budget and sticking to it. When you fall off the wagon at some point during the month, get right back up and recalculate your budget from what you have left. If the damage is bad enough, like an impulse purchase of The Lord of the Rings box set – the extended versions, you might have to start from scratch again with your next pay day.

Remember, no matter how bad it gets, no matter how embarrassing, keep trying. This is important stuff.

The Young Wealth Team

Flickr / playadura

Young Investors Beware of Investment Fraud

The Young Wealth Team — Fri, 20 Aug 2010 15:18:43 +0000

Here’s a piece of advice young investors should internalize early – like right now. Are you ready? You can not, will not, shall not get rich quick. If someone approaches you with a line about how they can take your pitiful CD money earning 4% and turn it into a 75% virtual money machine, you should be all over that, right? No! Not only “No!” but “Hell no!” If you think that kind of guaranteed return is legitimate, you need to seriously check where your head is at, because it must be some kind of crazy place.

Why does a line like that appeal to young investors? Easy. Because it feeds a very natural human trait called greed; the desire to make something from nothing and do it quick, then head to the beach for the rest of their life. Adults in the 18-25 age group are often especially susceptible to these come-on lines from fraudsters at the very point in their financial development when they should be holding onto what they’ve got with both hands.

Read the following example from YoungMoney.com:

A defendant in Florida, headed an investment fraud business which took in money from more than 1,500 victims throughout the United States and Canada. In 2006, the defendant pled guilty to failing to file a federal income tax return and various mail and wire fraud charges.

The perpetrator and another individual formed Pacific Achievements International (PAI) and used PAI to solicit investment funds, primarily through the internet. Based upon various false promises, investors transferred more than $13 million into PAI bank accounts in Oregon, Washington and Florida.

Individuals were led to believe that for every $5,859 invested, they would see a return of $9,720 within three weeks; and they could earn more than $1 million per month thereafter. As with most investment fraud cases such as this, the perpetrators used a ponzi scheme. They took money from late investors to pay early investors so that it appeared that PAI was successful.

The defendant and another PAI promoter diverted more than $2 million from investors to fund their lavish lifestyle. For his crimes, the defendant was sentenced to six years in prison and ordered to pay over $8.7 million in restitution to the victims.

And this kind of stuff happens every day. Don’t be one of the young investors who falls for this kind of scheme. Stay alert, stay real, and stay in control of your money.

The Young Wealth Team

Flickr / anonymous9000

The Digital Future is Now for the Young Entrepreneur

The Young Wealth Team — Wed, 18 Aug 2010 18:09:05 +0000

As a young entrepreneur, it’s likely you’re quite comfortable with the tools of the digital age but you might not realize exactly how much of an information revolution you’re in the midst of. The old way of print is dead. The internet killed it. Magazines, newspapers, and books are in the midst of being changed forever. But don’t feel sorry for them. They’re just changing format. Going digital. The ebook reader from Amazon (Kindle) and that gadget thingie from Apple (iPad) are the latest harbingers of change.

Think this digital information revolution might have a little bit of an effect on your future financial life as a young entrepreneur? You bet your sweet petunias it will, especially if you jump in and hold on with both hands. The old media has lost control. No longer does it require a journalism degree, years of working the trenches, and finally finding gainful employment with one of the Big Three (or Four) networks to get your voice disseminated to the masses.

Anyone with an opinion and internet connection can bleat their thoughts to the world. Blather and bloviating is no longer confined to a select few organizations who managed to set themselves up as the information gatekeepers. Equality and democracy in media has never been more evident than it is right now.

What does this have to do with the young entrepreneur? Everything! The worlds of investing, publishing, marketing, and business require new tools and new ways of thinking to succeed. But it’s for the better. Believe us, it is all for the better. Your assignment for today: put your brain to work dreaming up ways digital media can make you filthy rich.

The Young Wealth Team

Flickr / Yutaka Tsutano

Jason Hartman Looks to Share the American Dream

The Young Wealth Team — Fri, 13 Aug 2010 15:20:17 +0000

Jason Hartman was fortunate in that he was exposed to the teachings of a number of motivational and financial gurus early in life, a lucky happenstance that allowed him to apply his own natural entrepreneurial gifts to achieve success in business quickly. Real estate became his specialty. As stated, he was one of the lucky ones. For too many young Americans, the concept of financial literacy as a subject taught in school is almost non-existent. Hard to believe, but this most critical life skill is approached by most schools as an afterthought.

This explains why so many recent graduates walk out the doors with a shiny new diploma but lacking even the basic money management skills necessary to create a personal budget or balance a checkbook. Consequently, it’s not much of surprise that saving is down and consumer debt is up.

Jason Hartman decided to create a non-profit foundation to help correct this woeful level of financial ignorance by not only developing a constantly growing website filled with financial literary educational blogs but also to help deserving entrepreneurs and others in a way that really helps – with grants of money for appropriate projects. Jason’s ultimate goal is to help as many young citizens as possible learn how to build wealth and create their own version of the American Dream, whatever that might be. To do so requires particular tools and knowledge – the kind you won’t get in school.

Our country can truly be an economic miracle, even today. Jason Hartman firmly believes that. But nothing comes easy. It’s up to you to believe it can happen also, then to take advantage of the opportunities contained on this website.

Good luck!

The Young Wealth Team

Flickr / @MSG

Public Officials Traumatize Girl for Investing Young

The Young Wealth Team — Tue, 10 Aug 2010 15:55:14 +0000

Adults love to dispense encouraging words for those with the vision of investing young in their own small business, and the younger the better. How about the seven-year-old girl who, along with her mother, headed out to a fair in Portland, Oregon to set up a lemonade stand to sell refreshing summer drinks for a suggested donation of fifty cents a glass? Quite the little entrepreneur, wouldn’t you say?

Unfortunately, Suzie Lemonpusher forgot to pony up the $120 for an official business license, an error that opened her to a $500 fine, when the big, bad health inspector swooped in and told her to leave, that her lemonade was putting the well being of the entire county at risk. Apparently, quite a scene developed as nearby vendors gathered to support Suzie’s dangerously illegal business.

Luckily, the whole lot weren’t immediately hustled off to jail and deported to random Third World countries. That’s what you get for investing young, Suzie. Let that be a lesson to you that it’s far better to keep your head down and scratch for a pitiful hourly wage than exhibit the temerity to start your own business.

Multnomah County chairman, Jeff Cogen, quickly realized his inspectors were acting like blooming idiots and issued this statement: “A lemonade stand is a classic, iconic American kid thing to do. I don’t want to be in the business of shutting that down.” He apologized for the behavior of his overzealous inspectors and said more “professional discretion” would be used in the future.

Cogen’s words come too late for Suzie Lemonpusher who has sworn off investing young, or ever again at all, and contacted Kathie Lee Gifford about possible openings in her Honduran garment sweat shop.

Welcome to America, where you need a license to clear your throat.

The Young Wealth Team

Flickr / laffy4k