What’s the biggest mistake that stock market investors make?

by Fred Fuld III

The biggest mistake that investors make is selling too soon. If you have invested in a great company, and you have a decent profit, there is no reason to sell just because you have made money on it. Let me give you a couple examples of mistakes I have made so that you can learn from them.

Many years ago, when I was in the financial services industry, I was selling a lot of the Franklin Municipal Bond Funds and Franklin GNMA Funds. I went to visit the Franklin Mutual Funds headquarters (the company was in its old building at the time) to do some due diligence, and meet with the broker liaison at the company. When I was given a tour of the place, I noticed that walls were being knocked down, four people were sharing a small office designed for one person, and cables were literally being run down the hallways by installers right in front of me.

My first thought was “Wow,” this company is growing like crazy. I should check and see if Franklin Resources (BEN) is publicly traded. It was, on the Pink Sheets. (This was way before it was traded on the New York Stock Exchange.) I bought a couple hundred shares at about $7 per share, and it shortly rose to $8.

Also, at that time, I just bought a rental property. I thought at the time that I should probably sell the Franklin stock in case I needed the funds for the property, plus I had just made a 14% profit in a short period of time. I actually didn’t need the funds for the property down payment since I bought the property for nothing down (another story).

Since that time, the stock has had nine stock splits based on my calculation. If I had just kept the stock and forgot about it, my $1500 original investment would now be worth over $451,285, by my estimation, even after the stock dropped from $58 per share down to $21 per share over the last six years.

By the way, this extremely high return does not even include the dividends that I would have received over the years, which would obviously have boosted my return even higher. The stock currently yields over 5% right now.

I have another example. I had 100 shares of Boston Beer Company (SAM) that I held in multiple certificates. I had paid about $30 a share for the stock back in 2009. The next year, it rose to $90 a share. I thought that tripling my money in such a short period was a pretty good return, actually a fantastic return, so I thought, why not take all these certificates in to my broker and liquidate them.

While I was in the brokerage firm and one of the representatives was preparing a receipt for me including making copies of every certificate, another representative came over and said “What the hell is with all these certificates?” When he was making these rude comments, I seriously considered picking up my certificates, and leaving, but I didn’t, unfortunately. I wanted to take my profit. The stock is now trading over $643 a share. My original $3,000 would now be worth $64,300 in just one decade.

I could tell you one more story about Apple (AAPL) stock, but it would make you sick. It makes me sick whenever I think about it.

Anyway, the point that I am making is that the dollar amount of profit and the percentage amount of profit you have in a stock is irrelevant. If you believe in the company, there is no reason to sell it, unless you are very desperate for money. And if you are that desperate, see if you can get by with selling half.

Yes, you may read about the mistakes of holding on to losers, and not bailing out early. Maybe you lose $5,000 or $10,000 on a stock that goes to zero. But it is the big long term winners that pay for all those losses, and still provide huge returns.

Here is the best way to tell if you should sell a stock. Imagine that you didn’t own the stock but you have the money to invest in it. Would you buy it today? If the answer is yes, hold on to the stock. If the answer is no, sell it.

Disclosure: Author owns AAPL and SAM.

Let’s Say You’re Dead: Give Your Heirs a Break

by Fred Fuld III

Most people who think about estate planning are aware of and have probably set up wills and living trusts, and possibly medical advance directives and durable powers of attorney.

However, because so much is done online, your heirs may not be aware of all your cyber accounts. Are they aware that you have PayPal (PYPL)? Do you have any savings accounts with an online bank? What about online brokerage accounts where you have opted out of paper deliveries?

There are a lot of issues to consider beyond the will and trust. Here are just some of the tasks that you should consider to make things easier for your heirs with regards to online accounts.

Keep Track of All Your Online Accounts

The first place to start is identifying all the online accounts that you have along with logins and passwords. Some people like to type out a list on a Word document or text document. I personally don’t like that idea, unless the file is well protected and encrypted. Otherwise, if your computer is hacked, the hacker will have access to everything.

Others just write down a list of all those logins and passwords on a piece of paper. I have a friend who’s list is currently three pages long. I don’t like this practice either as it takes a long time to search through, since it is not alphabetized, and find the particular website that you are looking for.

I personally like using an Email and Website Password Logbook. These journals have alphabetized pages, so that all the accounts that begin with A are in the first section, all the Bs in the second section, and so forth. That way, I don’t have to look all over the place to find the password I want.

Since everything is handwritten on a hard copy, it can’t be hacked. (Just don’t lose it.) It is also a central repository for all your online accounts, which will make it simpler for your heirs to find everything.

Requirements for Account Liquidation Upon Death

It might be helpful to make your heirs aware of the requirements to liquidate online monetary accounts and stock brokerage accounts. For example, the requirements for PayPal are:

  • A cover sheet from the Requestor (or a person who is duly appointed or authorized to administer the estate of the deceased customer) identifying the account by the primary email address and request to have PayPal account closed
  • A copy of the death certificate for the account holder
  • A copy of a government issued photo ID (such as a driver’s license, passport or state-issued ID) of the Requestor
  • Legal documentation or a copy of the will that identifies the executor of the estate
  • State issued documentation if a living will is not present

Most online bank and brokerage accounts will require similar documents.

Facebook Accounts After Death

Social media accounts have special requirements in the event of death. As an example, Facebook (FB) has two options upon the death of the accountholder.  You can either have your account permanently deleted, which you can setup now while you are still alive, or you can have a Memorialized Account and it can be controlled by a legacy contact. Your legacy contact can be identified now also.

Twitter Accounts After Death

Twitter (TWTR) allows the removal of the account of a deceased person or an incapacitated person, with the submission of appropriate documents.

LinkedIn Accounts After Death

LinkedIn has an online form that can be filled out in order to remove the profile of someone who has passed away.

Instagram Accounts After Death

Instagram has similar options to Facebook. The account can be memorialized or it can be removed. For removal, they request the following:

  • The deceased person’s birth certificate
  • The deceased person’s death certificate
  • Proof of authority under local law that you are the lawful representative of the deceased person, or his/her estate

For other social media accounts, check out their Help link.

Email Accounts After Death

In terms of the deceased emails, this can be a delicate issue. You probably want your heirs to have access to your email accounts, especially those connected to bank and brokerage accounts, and accounts that are exclusively phone app based.

If there are any emails that you are uncomfortable with your heirs seeing, they should obviously be deleted, now.

Then there is the issue of if and who to contact about your passing. A friend of mine who I hadn’t contacted for a couple months had passed away shortly after I last called him. I received no email notification about his passing or the memorial service, even though I was on his email contact list. I only found out about it a month and a half later after reaching one of his relatives when I discovered my friend’s phone was disconnected.

Therefore, it would be helpful to provide a list of who you want contacted upon your death, along with emails, and possibly phone numbers.

You probably don’t want your heirs to do a mass email of all contacts, including the plumber you emailed two years ago, all the email newsletters that you subscribe to, the restaurant that you made an online reservation with, and so forth. So some filtering will be necessary.

Online Bank Accounts and Bills After Death

If you receive many of your bills by email, your heirs will need access to both your email account and your online bank account. Many bank customers have set up their account to autopay various bills.

Heirs need to review all bills, contact the bank right away, make sure that important bills, such as mortgage payments, are continued to be paid, and determine which other accounts may need to be cancelled, such as cable TV bills.

Online Stock Brokerage Accounts After Death

Remember that some brokerage accounts may be exclusively app based, such as Robinhood or WeBull. Most brokerage account liquidations will have similar requirements for submitting documents, however, the big issue is the sale of the stocks and bonds in the portfolio; in other words, when and how it is that done, or can the existing stocks be kept and transferred to the heirs. I suggest that you contact your own broker to get the details on the requirements and policies, if you want that info available for your heirs.

Your Cell Phone After Death

If you use dual-factor identification, access to your cell phone will be necessary. But even if you don’t, you will probably want your heirs to have access to it. Important phone calls may come in for a while, and heirs may need to access some of your finance related apps.

In your central password holding resource, don’t forget to include your cell phone’s passcode. I use this Password Logbook which sells for less than $7 on Amazon (AMZN).

Living Trusts

If you haven’t already, talk to an attorney about setting up a living trust and transferring your online bank accounts and your online brokerage accounts into the trust.

Anyone who has dealt with the death of a parent or other close relative knows the hassles involved. If you want to help out your heirs, it is a good idea to be proactive, especially when it comes to online accounts.

 

 

Disclosure: Author owns PYPL, AMZN, and TWTR. Affiliated links.

You May Be Entitled to Free Credit Monitoring or $125 Cash Payment

by Fred Fuld III

Equifax has set up a website for the settlement of the data breach back in September of 2017.

If you have been impacted, you can file a claim and receive free credit monitoring, or if you already have credit monitoring, you can request a $125 cash payment.

In addition, you may be able to claim for time you spent to remedy the misuse of your personal information, assuming you can provide documentation.

To see if you have been impacted, go to the following site, scroll down and click on the Find Out If Your Information Has Been Impacted button.

https://www.equifaxbreachsettlement.com

To file a claim, go to the following link:

https://www.equifaxbreachsettlement.com/file-a-claim

 

How to Triple Dip Your Rewards Points

by Fred Fuld III

It’s nice that you get cash back or rewards points when you use your credit card. It’s also great when you can get rewards from the company you make purchases from. It’s like double dipping.

But wouldn’t it be great if you could triple dip. How would you like to receive free stock in the companies that you buy from? Well now it’s possible.

There is a company called Bumped, which allows you to have a percentage of your purchase go towards fractional shares of stock in those companies. The percentage isn’t a lot but it adds up over time.

For example, if you buy rom Starbucks (SBUX), you get 2% of your purchase price going towards the company’s stock. If you buy from ExxonMobil (XOM), you get 0.5%. The range goes all the way up to 3% defending on the type of business.

Here are the categories and their percentages:

  • Coffee  2%
  • Gas/Convenience Stores  0.5%
  • Entertainment  2%
  • Family Dining  2%
  • Personal Care  1%
  • Quick Eats  3%
  • Vineyards  1%

So, for example, if I buy food and a beverage at Starbucks, and I pay with my cash back American Express (AXP) card, I will get the cash back bonus from AmEx at the end of the month. Plus, if I’m a member of the Starbucks rewards program, I get those benefits. Finally, if I have linked my AmEx card to Bumped, I get 2% of my purchase applied to the Starbucks stock.

My Bumped app when I just started out
My Bumped app when I just started out

There are a wide range of companies that are participating in this program. Just in the Quick Eats category alone, there is:

  • Burger King
  • Chipotle (CMG)
  • Jamba Juice
  • McDonalds (MCD)
  • Subway

Now you may ask, what about the private companies that are listed, such as Jamba Juice and Subway? Well, if you purchase from Jamba Juice, your 3% is applied towards the Vanguard Total Stock Market Index Fund ETF (VTI).

So when I bought a Jamba Juice recently, I got cash back on my AmEx card, I got more Jamba Juice  points since I’m a member of their rewards program, and I got 3% of my purchase automatically invested in VTI.

Other companies that are part of the program include Peet’s Coffee, BP (BP), Chevron (CVX), Shell (RDSA), Netflix (NFLX), Spotify (SPOT), Lyft (LYFT), Uber (UBER), plus several restaurants and other businesses.

Unfortunately, there is a waiting list for Bumped, (they don’t want to get overwhelmed as they are growing) but once they notify you that you are eligible, you can jump on the triple dip bandwagon.

Disclosure: Author owns MCD, VTI, SBUX, & XOM. I did not receive any compensation from Bumped.