Clever Girl Finance E-Book

Bola Sokunbi

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2020

Seitenzahl: 245

Beschreibung

Learn the basics of investing with this approachable guide to the world of finance Clever Girl Finance: Learn How Investing Works, Grow Your Money is the leading guide for women who seek to learn the basic foundations of personal investing. In a no-nonsense and straightforward style, this book teaches readers: * Exactly how investing works and what you should be doing, no fancy finance degree required * How to leverage investing to build long term wealth even on a modest salary * The key pitfalls to avoid in order to become a successful investor * How to build a nest egg and invest in your future * Insights from real-world success stories from other "clever girl investors" Clever Girl Finance teaches readers the irreplaceable value of investing for long-term financial gain, and the difference between making money and building wealth. Written for any woman who's ever sought out an accessible introduction to the world of investing, this book is especially suited to women interested in learning how investing works and taking guided action towards their financial success.

Leseprobe

Table of Contents

Cover

About the Author

Acknowledgments

You Are in the Right Place! Get Ready to Become a Clever Girl Investor!

How to Use This Book

CHAPTER 1: Adjusting Your Mindset About Investing

WHY INVESTING MATTERS

GETTING EDUCATED ABOUT INVESTING

WOMEN AND THE INVESTMENT GAP: WHY IT'S MORE IMPORTANT THAN EVER FOR WOMEN IN PARTICULAR TO INVEST

MY INVESTING STORY: THE COMPLETE GAME-CHANGER FOR MY FINANCES

NOTES

CHAPTER 2: How the Stock Market Works

WHAT IS THE STOCK MARKET?

STOCK EXCHANGES IN THE UNITED STATES

INDICES AND THE STOCK MARKET

THE ECONOMY AND THE STOCK MARKET

HOW THE ECONOMY AFFECTS YOUR PORTFOLIO

CLEVER GIRL INVESTOR: MEET JENNIFER “JENNY” COOMBS

NOTES

CHAPTER 3: Core Investing Concepts: Inflation, Compounding, and the Rule of 72

INFLATION

WHAT CAUSES INFLATION?

INFLATION IN THE UNITED STATES

COMPOUNDING

HOW COMPOUND INTEREST WORKS

THE RULE OF 72

COMPOUND INTEREST, THE RULE OF 72, AND DEBT

CLEVER GIRL INVESTOR: MEET CINDY E. ZUNIGA

NOTES

CHAPTER 4: Preparing to Invest

KEY FACTORS TO ENSURE YOU'RE PREPARED TO INVEST

SETTING YOUR INVESTMENT OBJECTIVES

UNDERSTANDING RISK

MITIGATING RISK

CHAPTER 5: The Different Types of Stock Market Investments

INVESTING IN STOCKS

MARKET CAPITALIZATION AND STOCKS

INVESTING IN BONDS

WHAT TO KNOW ABOUT BONDS

SHOULD YOU BUY INDIVIDUAL STOCKS AND/OR BONDS?

INVESTING IN FUNDS

INDEX FUNDS TO WIN

THE KEY BENEFITS OF INDEX FUNDS

POPULAR INDEX FUNDS

NOTES

CHAPTER 6: Researching Your Investments

THINGS TO LOOK FOR WHEN RESEARCHING INVESTMENTS

EXTRA CREDIT: MORE INVESTING TERMS AND DEFINITIONS

CLEVER GIRL INVESTOR: MEET ADEOLA OMOLE

NOTES

CHAPTER 7: Where and How to Purchase Your Investments

BROKERAGE FIRMS AND ROBO-ADVISORS

WORKING WITH A FINANCIAL ADVISOR

PRACTICING WITH SIMULATION ACCOUNTS

TRADING VERSUS INVESTING

CLEVER GIRL INVESTOR: MEET JULLY-ALMA TAVERAS

CHAPTER 8: Investing for Retirement

TYPES OF RETIREMENT INVESTMENT ACCOUNTS

WHAT TO DO WHEN YOU LEAVE YOUR EMPLOYER

TIPS TO MAXIMIZE YOUR RETIREMENT INVESTMENTS

ARE YOU SAVING ENOUGH?

INVESTING DURING RETIREMENT

CLEVER GIRL INVESTOR: MEET FANEISHA “FO” ALEXANDER

NOTES

CHAPTER 9: Simple Investing Strategies

THE 3-FUND PORTFOLIO INVESTING STRATEGY

ALTERNATIVE INVESTING STRATEGIES: THE 1-FUND, 2-FUND, 4-FUND, AND 5-FUND PORTFOLIOS

CLEVER GIRL INVESTOR: MEET JAMILA SOUFFRANT

NOTES

CHAPTER 10: Keeping Your Investmentson Target

HOW DOES REBALANCING WORK?

WHEN TO REBALANCE YOUR PORTFOLIO

A COMMON RULE OF THUMB: 100 MINUS YOUR AGE

HOW OFTEN SHOULD YOU REBALANCE YOUR PORTFOLIO?

TARGET-DATE FUNDS, ROBO-ADVISORS, AND PORTFOLIO REBALANCING

LETTING GO OF A LOSING INVESTMENT

CHAPTER 11: The Deal with Taxes

INCOME TAX AND CAPITAL GAINS TAX

TAX LOSSES

MINIMIZING YOUR TAX OBLIGATION

NOTE

CHAPTER 12: Investing Mistakes and Pitfalls to Avoid

KEY INVESTING MISTAKES AND HOW TO AVOID THEM

CLEVER GIRL INVESTOR: MEET REGINA BYRD

In Closing

TAKEAWAYS TO REMEMBER

Index

End User License Agreement

Guide

Cover

Table of Contents

Begin Reading

Pages

iii

iv

v

xi

xiii

xv

xvi

xvii

xix

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

147

148

149

150

151

152

153

154

155

157

158

159

160

161

162

163

165

166

167

168

169

170

171

172

173

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

Clever Girl Finance

Learn How Investing Works, Grow Your Money

Bola Sokunbi

Copyright © 2021 by Bola Sokunbi. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone], or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data

Names: Sokunbi, Bola, 1981- author.

Title: Clever girl finance : learn how investing works, grow your money / Bola Sokunbi.

Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2020] | Includes index.

Identifiers: LCCN 2020021966 (print) | LCCN 2020021967 (ebook) | ISBN 9781119696735 (paperback) | ISBN 9781119696759 (adobe pdf) | ISBN 9781119696742 (epub)

Subjects: LCSH: Women—Finance, Personal. | Investments.

Classification: LCC HG179 .S55236 2020 (print) | LCC HG179 (ebook) | DDC 332.0240082—dc23

LC record available at https://lccn.loc.gov/2020021966

LC ebook record available at https://lccn.loc.gov/2020021967

Cover Design: Wiley

Cover Image: © Clever Girl Finance Inc.

This book is dedicated to all the clever girls who are prioritizing their financial wellness and are focused on building real wealth.

About the Author

Bola Sokunbi is a Certified Financial Education Instructor (CFEI), investor, finance expert, speaker, podcaster, influencer, and the founder and CEO of Clever Girl Finance, a personal finance platform that empowers women to achieve real wealth and live life on their own terms.

She started Clever Girl Finance in 2015 to provide women with the tools and resources she wished she had when she began her financial journey.

Bola is also the author of the book Clever Girl Finance: Ditch Debt, Save Money and Build Real Wealth.

Today, she lives with her husband and twins in New Jersey.

Acknowledgments

To my dear husband and children, for cheering me on while I spent late nights and early mornings working on this book.

To my parents, Tunji and Emily, for all your support and advice on this journey.

To team CGF, Esther Bangura, Yazmir Torres, Anita Wikina, and Stacy Jeffries. Thank you for being part of the village helping to make Clever Girl Finance a success.

To the women who have contributed to this book—Jenny Coombs, Adeola Omole, Faneisha “Fo” Alexander, Jamila Souffrant, Jully Alma Taveras, Cindy Zuniga, Regina Byrd, Yezmin Thomas, Kalyn Chandler, Nicole Hatcher, and Sheryl Hickerson—thank you for empowering other women to achieve success by using your voices and allowing me to share your stories.

An extra-special thank you to Adeola Omole for supporting my research into the Canadian resources mentioned in this book and to Kate Braun for working with me through my edits.

To the incredible team at Wiley for working tirelessly to make this book a success, and to all the clever girls ready to build real, long-term wealth, who inspired me to write my second book.

Thank you so much.

Bola

You Are in the Right Place! Get Ready to Become a Clever Girl Investor!

You probably picked up this book because you've heard about investing time and time again. It's what the wealthy do to get and stay wealthy. It's that thing that you've heard you should be doing—basically, if you want to build long-term wealth, you need to invest.

It's the advice you hear consistently in the media, in books, and from various other sources. But perhaps the more you hear people talk about investing, the more overwhelmed you get.

It might be confusing to you. You might be wondering how others have done it. You may have even thought at one point that maybe it's just not for you because, well, you just don't understand how it works and the only thing you hear friends say about investing is how much money they've lost.

But you are still curious. Somewhere in the back of your mind, you've imagined what it would be like to become a successful investor gazing proudly over your portfolio and the wealth you've built.

You've imagined how you can leverage that wealth to pursue your dreams, live life on your own terms, pass down generational wealth, give back to your community, help others, and have financial peace of mind. All while your investments are continuously working for you.

You may have also picked up this book because you've read my first book, Clever Girl Finance: Ditch debt, save money and build real wealth, and are ready to level up your investing game now that you've built a solid foundation to achieve financial success.

Either way, you, clever girl, have made an excellent decision to put your money to work for you … and you are in the right place.

Investing is how the wealthy build and maintain real wealth. It essentially puts your money to work for you, lets you reap the returns of a flourishing economy, and in turn helps you accomplish your financial goals. However, in order to become that successful investor, you need to first understand how investing works so you can make informed decisions. You also need to have a solid plan along with clear objectives and strategies so you can achieve that success.

Keep in mind that when I say you need to understand investing, I'm not saying you need to become the next hotshot hedge fund manager (although we absolutely need more female representation in this field). Instead, by you need to understand investing I mean looking at the perspective of what you need to know personally in order to accomplish your long-term financial goals in the simplest way possible.

It's like the difference between becoming an automotive engineer building the next generation of driverless cars versus knowing how to drive a car safely, following the signs to get to your destination intact, enjoying the ride and scenic views, and arriving happy and excited to have reached your destination. So, with that being said, in this book I'll be breaking down exactly how investing works and more importantly how you can make it work for you.

You'll learn how to adjust your mindset about investing (yup, we'll be ditching those fears and any negative thoughts you may have picked up), why investing matters (especially for us as women), how the stock market works, and the core investing concepts you need to know, as well as how changes in the economy can impact your investments (including how to leverage events like economic recessions to your benefit!).

In addition, you'll learn about preparing yourself to invest, different types of stock market investments (how they work, how to research them, and how to buy them), all about retirement and non-retirement investing and how to work both at the same time, managing and minimizing risk, investing pitfalls to avoid, planning for taxes, and ensuring your plans stay on target.

Finally, we'll work through how you can create an overall approach that works for your life, leveraging the right tools and resources. Your life being the key here because the goals and objectives you have for your life are unique to you.

As with my first book, you and I won't be taking this journey alone. Throughout these pages, you'll read and learn from the personal stories of other women (my “clever” girlfriends) who overcame their investing fears, recovered from mistakes, and have achieved incredible success with investing.

You'll also get tips and key insights from investing experts I've met and worked with along the way on how you should be approaching your investments as you embark on this wealth-building journey.

How to Use This Book

I've written this book to help you become a more confident and successful investor. With that said, here are some tips to help you get the most out of this book:

I encourage you to pace yourself as you go through this book and leverage it as a guide as you start working on investing.

At the end of each section, you'll find practical action steps to help you make progress and take the steps toward becoming a successful investor. Make time to work through these action steps as you develop your investing plans and establish your portfolio.

You can choose to read through this book in one go and then come back to review your action steps, or you can do the action steps as you get through each section. Pick the approach that works best for you, but set the intention that you

will

take the necessary action. Your future self will thank you.

(Insert hugs and high-fives from you to you here!)

For additional resources like our articles, podcast episodes, educational videos, and free personal finance courses, visit clevergirlfinance.com and be sure to participate in our amazing community.

I'm so excited for you to get started!

Are you ready?

Let's do this!

CHAPTER 1Adjusting Your Mindset About Investing

Adjust your mindset; empower yourself to succeed.

#CLEVERGIRLSKNOW

The way you think about investing makes all the difference in whether or not you'll actually become a successful investor. That's why I believe it's so important first to adjust your mindset around investing, especially if you've had any negative thoughts or feelings toward it in the past. The last thing you want is for your own thoughts to be the roadblock in the way of the success you can achieve.

Some common things many of us tell ourselves about why we can't or shouldn't invest include:

Investing is too hard. I could never learn how to do it

.

Investing is only for rich people. They have extra money to burn

.

Investing is the same as gambling. I might as well hit the slots in Vegas

.

Investing is scary and I work too hard for my money to take those types of risks

.

Do any of the above statements sound familiar? In the past when you've thought about investing, you may have felt anxious, overwhelmed, confused, or stressed-out. Well, girlfriend, let's change that.

Here's the truth:

Yes

, investing can be hard to do, but it doesn't

have

to be if you have the right plan and strategy in place specific to your unique needs.

Yes

, rich people invest their money. For the most part, this is how they've built their wealth. But so can you! With commitment, discipline, and knowledge you can even join the ranks of the wealthy yourself.

Yes

, many consider investing a gamble. And it certainly can be if you don't know what you're doing! But since you're reading this book, you're definitely not about that “gambling away your hard-earned money” life. And yes, you work really hard for your money, spending hours commuting to work, working on tasks and projects, attending meetings, dealing with bosses and colleagues. It makes sense that you'd be apprehensive about investing after all the work you've had to put in to earn it. But in reality, investing is a way to make the most of that money and enable yourself to work less.

So, let's take the first step together right here. Decide to drop all the assumptions you have about why you can't invest and why you can't be good at it if you do.

Instead, look at it this way: investing is like learning a different language. Stick with me for a moment while I illustrate. Imagine you move to a country where you don't speak the language, but you need to get directions to a particular destination. You walk up to someone to ask for help and get a flurry of information in this language that you don't understand. They're pointing their finger in various directions, but you have no idea where they are telling you to go. You'd be pretty frustrated, right?

But then imagine that you decide to take matters into your own hands and fully experience all this new country has to offer—including the language. Not only would it make your life so much easier, but you'd also enjoy the experience of living in this new country so much more because you'd actually understand what was going on around you.

So, you buy a language dictionary and start taking language classes. After a few weeks or months, you'd be able to piece together phrases, then full sentences, and before you know it you'd be speaking the language fluently without giving it a second thought.

Investing is very similar. It takes time to learn, but with consistency and discipline you can get the hang of it and really grow your money. The key here is educating yourself, getting informed, and very importantly, conditioning your mindset for success.

Whatever doubts you've had about investing in the past, let them go. You are taking a new path here—one that is going to equip you with everything you need to be a successful investor.

Take Action

In a notebook or spreadsheet, create two columns. In the first, write down every fear or negative thought you have when it comes to investing. It can be based on your past experiences with investing if you've had any, or simply based on what you've heard from others or seen in the media. For example, one could be “I'm worried I'll lose my money in a recession.”

In the second column, write down all the things you wish you knew or would like to learn about investing that would help you counter each of the fears you've written down. Using our same example of a recession, the thing to learn could be “How to respond to a recession while investing.”

Keep this list handy as you go through this book. Check off the items you learn as you go along and cross out the fears next to them in the process. The more you know, the more confident you'll be as an investor and the fewer fears you'll have.

Clever girls know … Investing is an essential part of being able to achieve the big financial goals you have for your life.

#CLEVERGIRLSKNOW

WHY INVESTING MATTERS

In today's world, there are only two ways to make money.

The first way is the traditional one: working. We all know about this one. You receive income for performing a service and essentially trading your time for money. This method encompasses things like working for an employer part-time or full-time, working for yourself actively in your business creating a product or service, working with clients on a freelance basis—effectively, anything that requires you to wake up in the morning and get to work.

The second way is by putting your money to work for you, where your active participation is not constantly required. For instance, this could mean investing passively in real estate and charging rents that not only cover your expenses but net you a profit. It could mean investing in a business venture that's run and managed by others. Or it could mean investing to earn portfolio income via the stock market (what this book is about!), meaning the money you earn from gains and dividends of stocks in your portfolio. (If you're not 100% sure what a dividend or portfolio is yet, we'll get there.)

You might be saying to yourself, “Well, I save my money in the bank.” However, while savings accounts can be excellent for the short term (e.g. saving for emergencies, saving to buy a home, saving for a wedding, etc.), the truth is that they are less successful for the long term. Interest rates are typically so low that you'll never be able to earn more than what you save—especially when you consider inflation, which will eat away at the actual value and purchasing power of your savings.

Plus, keep in mind that in order to have the money to save in the first place, you need to exchange many hours of your time for money and spend less than you earn. After all that work it would be a shame for your money to lose value or remain stagnant.

To really help you home into what I'm saying, I'll repeat a key point: When you save your money in a bank account, you'll never be able to earn much more than the amount you save.

Back to stocks: How exactly do you earn money in the stock market? Well, as an investor, you can earn money from:

Appreciation.

This is what happens when the invested assets you own increase in value.

Interest payments.

This is money you earn from buying investments like bonds, where you lend money to a corporation or to the government and they guarantee interest in return.

Dividends.

These are payments that companies issue to their stockholders based on profits earned.

Because there are multiple ways to earn money by investing in the stock market, there is the opportunity for you to diversify your investments and earnings. As you continue doing this over time, your money earns money, and then that money earns money (this is called compounding), so we are talking about potential exponential growth here. This can all multiply far beyond what you are able to earn by exchanging your time for money and putting it in a savings account. Not to worry, we'll be getting into more details on how all of this works later.

So why does investing matter?

It matters because regardless of how you do it, it's the one way in which you can put your money to work for you so you can increase your income without increasing your workload and build the life you truly desire. If you've ever thought about retiring early into the lap of luxury, traveling the world with loved ones, owning a beautiful home or even multiple homes, having the freedom to work on your passions, being able to be generous with loved ones and charities, or any other dream that money can empower you to achieve, then investing is how you get there. If you're wondering how the truly rich get and stay rich, investing is the answer. That's right—no magic tricks!

That's why investing matters.

GETTING EDUCATED ABOUT INVESTING

By now you get why investing matters. You need to invest to grow your money, point taken. But perhaps you have wondered why you need to know the details of how it all works. After all, these days you can simply input your goals into your favorite robo-advisor tool and it will create a master plan for you. Or better still, you can hire a financial advisor to figure it all out for you. Isn't that what you pay them for? In theory, this sounds great, but realistically not so much.

Getting educated about how investing works is key to being able to make informed investing decisions. And when you're able to make informed investing decisions, you become a better, more confident, and more successful investor.

Don't get me wrong, I'm not saying that you need to become the Queen Bee of Wall Street or take on a side gig as an investment banker in order to invest successfully. What I'm saying is that it's important for you to know what things mean and how things work so that when you put your money in the stock market, you have a good sense of what's happening and how to plan accordingly in line with your financial goals.

Look at it this way: when you purchase a car, you don't really need to know the details of what parts make up the engine, the mechanics of how the seat is designed to recline and move forward, or the science behind how the air-conditioning turns hot air from the outside into cold air on the inside based on the temperature you've set. (If you have an interest in learning how all of that works, that's great, and hey, why not? I'm just saying you can still drive the car either way.)

But what you definitely need to know, at a minimum, is how to turn the car on, how to put gas in it, how to adjust your seat and mirrors, how to drive it (and parallel-park it), and what the traffic rules are depending on where you live. You don't have to know it all; you just have to know enough to get you successfully to your destination. The bottom line is that with most things you do in life, you are going to need to have a bit of knowledge in your back pocket (or Chanel handbag—book #1 readers, you know the backstory!) to make smart decisions.

Before you can automate your investing with your robo-advisor tool, you'll need to input key information so its complex algorithms can come up with an investing strategy for you. But more importantly, you'll also need to understand the strategy it presents to a point where you have a degree of comfort and confidence about how it's going to invest your money and what could potentially happen to it.

The same applies to working with a financial advisor. Before you have your financial advisor go off and create a plan for you, you'll need to have a conversation or a series of conversations with them. And you want your side of those conversations to clearly convey your goals and objectives. You also want to be able to comprehend your advisor's side of the conversation when they start suggesting various investment strategies and approaches to you.

Furthermore, being well-informed will help you avoid being taken advantage of if you do decide to outsource your money management. Perhaps an advisor recommends a subpar investment or charges too high a fee. If you're not educated about investing, you'll be less equipped to notice when something is amiss.

So, like I said earlier, knowing how investing works will help you make informed and confident decisions as an investor and will help you gain peace of mind about your money. Because at the end of the day, as easy and as simple as it might sound to hand everything investing-related off to an automated program or advisor or even avoid it altogether, you don't want to make guesses or blindly trust someone else with your hard-earned money.

WOMEN AND THE INVESTMENT GAP: WHY IT'S MORE IMPORTANT THAN EVER FOR WOMEN IN PARTICULAR TO INVEST