Investing 1.0

The Numbers

  • About 52% of Americans do not own stock.
  • Stock market average annual returns is between 8% and 12%.
  • The S&P 500 Index is up ~40% from October 2012.

The Basics

Stock (Equity) Market: where shares of a corporation are issued and traded. The stock market allows stockholders, or shareholders, to participate in a company’s growth. Stocks are traded through a stock exchange; the two American stock exchanges are the New York Stock Exchange (NYSE) and the National Associations of Securities Dealers Automated Quotations (NASDAQ).

Bond (Debt) Market: facilitates the transfer of capital from savers to the issuers for needed capital to fund government projects, business expansions, and ongoing operations. There is no central place that bonds are traded.

Commodities Market:  selling and buying raw or primary goods. There are two types, hard and soft. Hard commodities include gold, silver, rubber, oil, etc. Soft commodities include corn, wheat, coffee, sugar, soybeans, pork, etc. Commodities are traded through future exchanges; the two largest American future exchanges are the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME).  Commodities are highly volatile investments.

If people or organizations want to buy and sell something, then there’s a market for it. Stocks and bonds are the most common investments, but there are other investment markets.


Consider opening an IRA or Brokerage account and start investing! The best way to learn how to invest is to  1) open an account, 2) utilize the tools to analyze stocks and bonds, and 3) buy something.

Some great IRA and brokerage options are Charles Schwab, eTrade, Fidelity, MerrillEdge (owned by Bank of America),  Scottrade, and TD Ameritrade. Each online broker platform will allow you to open an account, often for $500 or more, and will provide the resources to do research on investment opportunities.

I will cover more on investments over the next few months. The general idea is you want good stocks and bonds that have a proven record of gains for at least 3 years. The longer the track record, the better.

Measuring Your Improvement

The markets often scare people away, with all of the numbers, arrows, and colorful charts. For investing, measuring your success is relatively easy. Is your stock making money? If not, do you believe that your stock will make money in the future? If you believe your stock will make money, then what are the drivers of growth?  New products and services being launched, new management, merging with competition, cheaper prices, and higher quality products or services are a few types of drivers of growth. Also, look at similar stocks to the one you own. For example, if you own shares of Apple (Ticker: AAPL) stock, then compare the performance, or returns, with peer technology companies, like Google (GOOG), Microsoft (MSFT), and Netflix (NFLX).


8 Stages of Financial Freedom

People seem to really enjoy the 1.0 series so far. As mentioned, sending me questions either in the comments or via email ( helps me tailor content for readers. Last week, I received two questions that I’d like to address:

Do you recommend cutting up your credit or closing the account altogether?

I don’t recommend using credit cards unless you pay off the full balance each month. If you are unable to pay off the full balance each month, then I suggest closing the account altogether. Better safe than sorry. You can build credit using other lines of credit (student loans, car, phone bill, etc.).  You also don’t need credit to live; there are other ways that banks can evaluate your ability to pay when getting a mortgage or car loan. Using an emergency savings account, instead of a credit card, in the case of an emergency is the best option.

Do I work on debt or savings first? What are the steps to financial freedom? 

Below are my 8 stages to financial freedom. I used these stages when I graduated from college in 2009 to get out of debt in less than 18 months and plan to get out of debt in about 2 years once I am gainfully employed.

Eight Stages of Financial Freedom

Eight Stages of Financial Freedom

Savings 1.0

The Numbers

  • Only 38% of Americans have emergency savings for an unexpected $500 to $1,000 event.
  • About 30% of Americans have no money saved for retirement.
  • The average American saves 5.8% of their disposable income, or income after taxes.
  • As of 2014, sixty-five percent of Whites have some retirement savings compared to 15.3% of Blacks, 6.1% of Asians, and 2.9% of mixed and other races.

The Basics

Savings: all income not spent.

Screen Shot 2015-09-30 at 7.16.15 PM

Top Reasons to Save

Safety Net. There are several reasons to save. Since minorities are significant more likely than peers to experience financial hardship, I argued in Debt 1.0 that minorities build a 6-9 month safety net; ethnic minorities often take on the financial burdens of their parents and grandparents since these groups were not allowed traditional wealth building strategies in the past. My parents, who are fourth generation American, were the first generation of people in my family to gain access to a mortgage from a traditional, national bank; this was in the 1970s.

Retirement. Retirement is whatever you want it to be. Dream big and plan ahead. I don’t expect to work 60 hour work weeks in my 70s, but I do plan to continue working. I want to travel internationally for months at a time, and be able to support myself. The most common retirement savings accounts are 401Ks/403Bs and IRAs; 401Ks and 403Bs are offered through employers and IRAs are offered at most banks. Each retirement savings account has two options (some employers do not offer roth accounts): Traditional and Roth. Traditional accounts defer taxes until you began until retirement, while Roth account pay taxes now with no taxes at retirement.

General/Other Investing. Home ownership is the quickest way to build wealth. For the traditional home loan (mortgage), banks prefer that you have a down payment of 20%. There are ways to get around the 20%, but an additional insurance, called private mortgage insurance (PMI), is required for a down payment less than 20%. The Federal Housing Administration (FHA) only requires a 3.5% down payment, but other stipulations are required. Your down payment, like most loans, is mostly dependent on your income and credit history; a bigger down payment is ALWAYS better.

Children’s education, particularly college, is stupid expensive. Market speculators think that America is headed into a Student Loan Bubble/Crisis because student loans have become such a burden to millennials, causing a delay in home ownership and a number of other wealth building tactics that young adults typically explore and invest in. As I stated in Debt 1.0, “[t]hirty percent of Millennials would sell an organ to get rid of student loans.”

Savings 2

Detailed Chart on Top Reasons to Save


There is always a reason to save. Outside of a small emergency savings ($2,000), I don’t recommend saving before clearing up small debts. After small debts have been paid, I recommend a 6-9 month emergency fund and then saving for whatever short-term and long-term goals that you have. The 6-9 month emergency fund should be liquid, or easily available for use.

Measuring Your Improvement

  • Paying all of your bills on time
  • Minimizing your debt
  • Contributing to your long-term goals each month
  • Allowing for money to meet some of your short-term goals 3-4 times a year

Saving is the road to wealth building. I believe that having a cushion, particularly as a minority, can provide significant peace of mind. Similar to debt reduction, a robust savings account allows you to think with a clear head, giving you the opportunity to evaluate career and life goals in a different way. Typically, you can create a 6-9 month savings account in less than 1 year.

Reach out to me at if you have more specific questions. Happy to share information on how to build a budget, kill your debt, or create a savings strategy.