Why do so many of us have such poor attitudes toward money? There are a few convincing cases you can make: Not enough education, too much information, confusing messages from the media or simply a lack of interest.
Whatever the reason, it’s clear that young people aren’t doing the single most effective thing that will make them rich: Investing in the stock market.
According to a recent Gallup poll, only 37% of young Americans ages 35 and under said they owned stocks between 2017 and 2018, compared to the 61% of people over the age of 35 did own stocks.
Opening an investment account gives you access to the biggest money-making vehicle in the history of the world — and you don’t have to be rich to do it. Many account providers will waive minimums (the amount required to open an account) if you set up an automatic monthly transfer.
Invest now — you’re not getting any younger
What if you had started investing $10 per week five years ago? Assuming an average return of 8%, you’d have thousands of dollars today— all from investing a little more than $1 per day. Think about that $10 a week. Where did it go, anyway? If you’re like most, you probably spent it on Uber rides and Frappuccinos.
Despite wild rides in the stock market, the best thing you can do is to think long-term and start investing early:
- If you invest $10 per week: After one year, you’ll have $541; after five years, you’ll have $3,173; after 10 years, you’ll have $7,836.
- If you invest $30 per week: After one year, you’ll have $1,082; after five years, you’ll have $6,347; after 10 years, you’ll have $15,672.
- If you invest $50 per week: After one year, you’ll have $2,705; after five years, you’ll have $15,867; after 10 years, you’ll have $39,181.
Stop making excuses
Although most people are limited by circumstances, most will never get rich simply because they have poor money practices.
If you’re in your 20s or early 30s, there’s still time to set aggressive investment goals. The first step is to understand what your excuses (or what I call “invisible scripts”) really mean.
- Invisible script: “There are so many stocks out there, so many ways to buy and sell stocks, and so many people giving different advice. It feels overwhelming.”
What it means: This is code for: “I want to hide behind complexity.” Any new topic is overwhelming (i.e., diets, workout regimens or parenting). The answer isn’t to avoid it — it’s to pick a source of information and start learning.
- Invisible script: “I don’t want to be the person who buys into the market when it peaks.”
What it means: You already know you can’t time the market, but you just don’t understand it. You can make this problem disappear by automatically investing each month.
- Invisible script: “I haven’t invested in anything because there are so many different options to put my money in over the long term (i.e., real estate, stocks, cryptocurrency and commodities). I know I should invest, but stocks don’t ‘feel’ comfortable. “
What it means: The great irony is that you believe “control” will help your investment returns. In reality, you’d actually get better returns by doing less. The less control you have, the better. The average investor buys high, sells low and trades frequently (which incurs taxes). All of this cuts your returns by huge amounts.
- Invisible script: “Due to my lack of knowledge and experience in the stock market, I don’t wish to lose my hard-earned money.”
What it means: Ironically, every day that you don’t invest, you’re actually losing money due to inflation. You’ll never realize this until you’re in your 70s, at which point it’ll be too late.
- Invisible script: “Fees are a big part of it. I only have a small amount to invest, so trading fees can make a big dent in my returns.”
What it means: It’s totally mystifying how people think “investing = trading stocks.” Oh wait, no it isn’t — every dumb commercial and app pushes this agenda. When you follow my advice, your fees can be really low.
- Invisible script: “I ordered a small coffee instead of a large, so I’m actually saving X dollars a day. Am I adulting?”
What it means: Not really.
Ramit Sethi, author of the New York Times best-seller “I Will Teach You To Be Rich, ” has become a financial guru to millions of readers in their 20s, 30s and 40s. He became a self-made millionaire at a young age thanks to his website (which he started as a Stanford undergraduate in 2004), book and personal finance courses.
This is an adapted excerpt from “I Will Teach You to Be Rich” by Ramit Sethi (Workman). Copyright © 2019.
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UBS earnings Q2 2019
UBS announced a net profit of $1.4 billion for the second quarter of 2019. This compared to a net profit of 1.28 billion Swiss francs ($1.29 billion) in the second quarter of 2018.
The Swiss-lender announced that this is the highest second-quarter net profit since 2010. The profit boost comes in despite declines in both its investment bank and wealth management divisions.
Here are some key highlights for the quarter:
- Operating income hit $7.5 billion versus $7.6 billion a year ago
- Return on tangible equity stood at 11.9% versus 12% a year ago
- Common equity tier 1 capital ratio of 13.3% versus 13.4% a year ago
“We saw a normalization of the environment coming out of a good March into the rest of the quarter. I’d say the highlights were clearly: diversification paid off again,” Sergio Ermotti, chief executive officer of UBS told CNBC’s Joumanna Bercetche.
UBS shares hovered around the flatline shortly after the market open.
Global Wealth Management down
UBS, however, saw a decline in its global wealth management business compared to a year ago. The bank reported an operating profit of $886 million compared to over $1 billion in the second quarter of 2018.
Profits in its investment bank division also fell from a year ago. It registered an operating profit of $440 million in the second quarter for this year compared to $571 million a year ago.
Speaking to CNBC, Ermotti explained that “the u-turn in the interest rate environment in the U.S. has created pressure.”
Market expectations point to an interest rate cut by the Federal Reserve later this month. The central bank had embarked on a normalization path in 2015, after the global and sovereign debt crises. However, recent data has shown worsening economic conditions in the U.S.
In Europe, the outlook is similar for monetary policy. The European Central Bank (ECB) said in May that if incoming economic data does not show an improvement, then the central bank will be prepared to announce more stimulus.
Ermotti told CNBC that he is not sure whether further easing will propel the economy. “I’m not sure going deeper into negative territory or using the QE (quantitative easing) is the way to get out of the problems…We need more structural answers,” he said.
Ermotti warned “there are severe broader considerations than just the banking industry” from low rates.
Ermotti’s comments come in after the Swiss-lender warned in its latest results that a return to monetary stimulus from various central banks could dent profits going forward. “A sharp drop in interest rates and expected rate cuts will continue to adversely affect net interest income compared with last year,” UBS said.
However, the Swiss bank expects that a diversified business, stronger investor sentiment and higher market volatility will help offsetting impacts from changes to monetary policy.
In the previous quarter, UBS had announced that cutting an extra $300 million from its 2019 costs after anticipating the fall in revenues.
“We constantly look at ways from a structural and tactical point of view, and the 300 million were pretty much tactical. We always think constantly on how to optimize our cost base but at the same time we are investing in the future,” Ermotti said Tuesday.
Q2 net profit falls 18% amid Popular costs
Santander said on Tuesday second-quarter net profit fell 18% from a year earlier, due to one-off restructuring costs from its acquisition of troubled lender Banco Popular and a weak performance in Britain.
The euro zone’s largest bank in terms of market cap — which took over Banco Popular in June 2017 — reported a net profit of 1.39 billion euros ($1.56 billion) for the April to June period, topping analysts’ expectation of 1.29 billion euros in a Reuters poll.
Steady growth in Latin America business volumes, where it makes 46% of its earnings, was not enough to offset charges of 706 million euros, mainly in Spain.
Like its European rivals, Santander is struggling to lift earnings from loans in its home market with interest rates hovering at historic lows.
“We have delivered the strongest underlying quarterly performance in over 8 years, reflecting the progress that we have made in our commercial and digital transformation,” Jose Garcia Cantera, chief financial officer of Santander, told CNBC’s “Squawk Box Europe.”
“Our businesses in both North and South America continue to perform extremely well and while the charges relating to ongoing infrastructure in Europe have impacted attributable profit — something that we anticipated — we are already starting to see the value that this will create going forward,” Cantera said.
Net interest income, a measure of earnings on loans minus deposit costs, was 8.95 billion euros, up 5.6% from the second quarter of last year and 3.1% higher against the previous quarter due to a solid lending growth in Latin America.
Analysts had forecast a NII of 8.76 billion euros.
In Britain, its third-largest region, profit fell 41%, partly due to restructuring costs of 26 million euros and provisions of 80 million euros.
Santander ended the quarter with a core Tier-1 capital ratio, a closely watched measure of a bank’s strength, of 11.3%, compared with 11.23% in the previous quarter.
Shares of the bank were up over 2% shortly after the opening bell.
Coca-Cola raises revenue forecast after earnings beat
Coca-Cola on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations, driven by sales of its namesake soda brand.
Shares of the company jumped 5.6% in early trading. The beverage giant’s stock, which has a market value of $230.6 billion, is up 14% in 2019. Shares of rival PepsiCo, which are valued at $182.8 billion, have been closing the gap with Coke, rising 18% over the same period.
“Our strategy to transform as a total beverage company has allowed us to continue to win in a growing and vibrant industry,” CEO James Quincey said in a statement.
Here’s what the company reported for its fiscal second quarter compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Adjusted earnings per share: 63 cents, adjusted, vs. 61 cents expected
- Revenue: $10 billion vs. $9.99 billion expected
The beverage giant reported net income of $2.61 billion, or 61 cents per share, up from $2.32 billion, or 54 cents per share, a year earlier.
Excluding items, Coke earned 63 cents per share, topping the 61 cents per share expected by analysts surveyed by Refinitiv.
Net sales rose 6% to $10 billion, narrowly beating expectations of $9.99 billion. Coke raised its full-year outlook for revenue and now expects organic revenue growth of 5% rather than 4%.
“We think the dollar is towards the end of a strong cycle,” CFO John Murphy said.
The company attributed its strong performance during the quarter to 4% volume and transaction growth in Coke’s namesake brand. Its Zero Sugar line once again saw double-digit volume growth across the globe.
Quincey told analysts that nearly 25% of the company’s revenue now comes from new or reformulated beverages, up from 15% just two years ago.
During its second quarter, Coke partnered with Netflix to bring back New Coke and help promote the third season of “Stranger Things.” It also rolled out Coca-Cola Plus Coffee in more markets, as the company expands into different kinds of caffeinated drinks.
That includes Coke’s first energy drink under the Coca-Cola brand. Coca-Cola Energy uses caffeine from naturally derived sources and is available in 14 countries, including Japan and South Africa. By the end of 2019, the beverage giant plans to bring it to Mexico, Brazil and four more countries.
Quincey declined to share any plans to sell Coca-Cola Energy in the U.S. but said it would benefit the company to wait to learn more from early markets before entering its home market. In July, an arbitrator ruled that Coke can peddle the energy drink under the terms of its contract with Monster Beverage.
The company has also launched its first product line with Costa Coffee since it acquired the U.K. coffee brand in January for $4.9 billion. The canned coffee drinks contain double shots of espresso and will launch in Poland and China this year. There are no plans to introduce the ready-to-drink coffee beverages in the U.S.
Coke reiterated its fiscal 2019 earnings forecast, saying that earnings per share could fall or rise by 1%. The company had pointed to currency fluctuations, Fed rate hikes and changing tax rates as reasons for its gloomy earnings projection. Murphy told analysts on the conference call Tuesday that “currencies have gotten worse,” but he expects a more “benign” currency environment in 2020.
Net sales in the Asia Pacific and Europe, Middle East and Africa segments were flat for the quarter, largely due to the impact of currency. Revenue in Latin America fell 6% because of a 13% currency headwind, although Coke said it had strong performance in Mexico and Brazil. Quincey told analysts that Mexico’s economic growth is slowing, so the company is tweaking its strategy for the country.
North America was the only region to reported net revenue growth. Price hikes and packaging initiatives helped propel revenue growth of 2%. The company said that it saw strong performance from soda, water, sports drinks, juices and dairy and plant-based beverages.
Correction: An earlier version misstated the amount of the Costa deal. It was $4.9 billion when it closed, according to a Coca-Cola spokesperson.
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