Money Management

Investing doesn’t have to mean spending hours researching stocks. Discover why one finance expert swears by index funds. 

If you’re just starting out with investing, it’s easy to feel overwhelmed and intimidated. I just opened my first brokerage account a few months ago. Even though I went in with a plan, it was still a little nerve-wracking to transfer money from my checking account and buy investments. Right now, my focus is saving money to buy a home next year, but I intend to become a regular investor and open a retirement account after I get into a house. And when I’m ready to go all in, I’ll be taking a page from money expert Tori Dunlap.

Dunlap, who is also known as the Financial Feminist, recently noted in a podcast interview with Equity Mates that “investing should not be sexy — it should be consistent, stable, and over a long period of time.” She also described herself as “an index fund girly all the way.”

Index funds are one of the easiest and most approachable ways to invest. Let’s take a closer look at Tori Dunlap’s investing strategy and learn more about how index funds can make investing easier.

What are index funds?

Index funds are a type of stock or bond investment that tracks a market index. There are many different index funds to choose from, and some of the most popular track the S&P 500, which is made up of the 500 biggest companies listed on U.S. stock exchanges.

You don’t have to think big when it comes to index funds, though. You can also find index funds that track stocks in certain industries, single countries, and beyond. You can invest in them via your taxable brokerage account as well as through a retirement account, like an IRA.

Why does Tori Dunlap like index funds?

Index funds certainly work for Tori Dunlap’s investing philosophy — namely, investing is something to do consistently and over a long period, with an eye toward stability. When you contribute money to your brokerage account, you can use it to buy shares of index funds — and doing so regularly will give you the opportunity to grow your money over time.

Let’s say you buy shares of an index fund tied to the performance of the S&P 500. In 40 of the last 50 years, the S&P 500 gained value and returned an average of 10% per year. It’s crucial to stay invested and keep investing more money over the long term because in individual years (or months, or weeks), the stock market fluctuates. But if you can commit, you stand a good chance of a solid return over many years. No, it’s not sexy, but it works.

Other benefits of index funds

Index funds are also a low-cost way to invest, and if you’re just starting out, this is an attractive prospect indeed. They have lower fees than actively managed funds do since there’s no human managing your investments. According to The Motley Fool, broad market index funds (like an S&P 500 fund) typically have expense ratios around 0.05%. So if you have $10,000 invested in one, you’ll only pay $5 per year for the privilege.

Finally, index funds make it easier to maintain a diversified portfolio, which is a major key to successful investing. You don’t want all your money tied up in one company, and if you buy shares of index funds, you get exposure to many different companies, all in one fell swoop.

Index funds aren’t a good way to make a fast buck, but if you’re hoping for dependable returns over the long term and a low bar of entry (you can get started with investing with just a little money), give them a look.

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A secured personal loan allows you to pledge collateral to borrow. Here are some of the assets you can potentially use to get approved for one. 

If you need to borrow money, a personal loan is one option. A personal loan could be provided by a bank, credit union, or online lender. You’d apply to borrow a set amount of money and, if approved, a lender would distribute the funds for you to use for any purpose. You’d be charged interest, at a rate your lender sets, and would pay back the loan — usually over a few years.

Personal loans can fall into two categories. Secured loans are those where you pledge collateral, while unsecured loans are those guaranteed only by your word. It’s important to understand the differences and make sure you know what kinds of assets you can use to get a secured personal loan.

Here’s what you need to know.

You can use these assets to get a secured personal loan

When you get a secured personal loan, you must pledge collateral to gain approval. This means you must give your lender an ownership claim over some of your assets. If you pay as promised, you keep the collateral. If you don’t, your lender can easily seize the assets to satisfy the debt.

Secured loans are less risky for a lender because if you don’t pay, it has assets it can take. This is different from an unsecured loan, where you simply promise to pay and a lender doesn’t have a right to take your assets if you fail to fulfill that obligation. You can get approved for a secured loan much more easily because they present less risk to the lender, but you need assets to guarantee the loan.

The specifics of what types of property can serve as collateral will vary from lender to lender, but in general, the following types of assets could potentially be used to guarantee a secured personal loan:

Your houseA vehicleMoney in your savings accountMoney in your investment accountsValuable possessions, such as art or jewelryFuture paychecks

If you are considering applying for a secured personal loan, ask your lender exactly what the requirements are for the assets that you pledge to guarantee the loan. That way, you can make sure you have sufficient collateral to get approved.

Should you take out a secured personal loan?

If you need to borrow and you have the assets to guarantee the loan, a secured personal loan can be worth considering. However, you should find out first if you can get an unsecured loan at a reasonable rate so you don’t put your assets at risk.

Your credit score and income will impact eligibility for an unsecured loan much more than for a secured one, so if you don’t qualify on your own, you can try to take steps such as paying down debt to improve your credit score. You could also see if a creditworthy loved one with a good credit score and plenty of income might be willing to cosign an unsecured loan for you.

If you cannot get an unsecured personal loan at a competitive rate, there’s nothing wrong with moving forward with a secured loan as long as you are confident you can make every payment. Remember, you are putting your collateral on the line so you don’t want to take a chance of borrowing if you might default.

If you have looked carefully at how the loan payments will fit into your monthly budget, you’re confident you can make every payment, and you truly need to borrow but can’t get affordable financing elsewhere, a secured personal loan may make sense for you. Just be sure to compare rates and terms carefully among lenders, and to ask upfront exactly what collateral is required so you can ensure you qualify.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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Amazon Prime Day was a win for the online retail giant this past July. But read on to see why this writer didn’t really participate. 

Amazon Prime Day took place on July 11 and 12 this year. And data from Adobe Analytics shows that U.S. consumers spent a rather astounding $12.7 during that two-day event. I, however, shopped minimally on Prime Day this year for one big reason.

I didn’t have a large list of items I needed

During Prime Day, my husband and I bought a new mattress for our daughter’s bed and a couple of storage pieces to help get ourselves more organized. All told, we spent about $200.

Now, we could’ve spent more than that. We have a few different savings accounts, including one for travel and leisure purposes. So had I run up a larger credit card tab, it would’ve been fairly easy to pay it off.

But the reason I didn’t spend more than $200 on Prime Day (and didn’t buy anything particularly fun or interesting) is that there wasn’t anything special on my wishlist. So I didn’t see the point of buying things I didn’t really want or need just because they were on sale.

Sure, some of the deals were tempting. At one point, I considered buying new sneakers because the price Amazon was offering was great.

But then I realized that I didn’t actually need new sneakers. Even though I replace mine fairly often due to running and walking a lot, I had just purchased a new pair a few weeks prior to Prime Day. And also, the price I’d snagged on a random June afternoon was quite comparable to the Prime Day price I saw for my go-to brand. So there wasn’t a really compelling reason to spend the money at that point in time.

Self-control can go a long way

It’s easy enough to get tempted by sales events like Prime Day, and to purchase items when you know they’re heavily discounted. But there’s one question that I try to ask myself before buying anything — whether during an event like Prime Day or just in general. And that question is, “Would I be buying this if it weren’t on sale?”

If the answer is no, then chances are, it’s not something that’s so important to me in the first place. And so I’m better off not blowing money on it.

In fact, by not spending too much in the course of Amazon Prime Day, I had more money to spend on meals and entertainment during my family’s recent summer vacation. And in hindsight, I made the right call, because it was nice being able to enjoy a few extra restaurant meals together after long days of hiking rather than going back to our rental and cooking while on vacation.

Events like Prime Day are meant to put pressure on consumers to take advantage of deals while they’re available. But with retailers like Amazon, there are deals all year long.

Meanwhile, Amazon has announced plans to run a second Prime Day event this October. And I intend to take the same approach as I did in July. If you don’t want to end up with shopper’s remorse, I suggest you do the same.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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Thinking of running your own company? Be sure to consider these downsides before you move forward. 

Running a small business can be a great way to make a living. I’ve operated my own company since I started working and I wouldn’t ever want to have a traditional employment relationship, since being an entrepreneur has worked out really well for me.

But while there are plenty of benefits of being your own boss and running a business of your own, there are also some disadvantages. Here are four huge downsides to consider before you decide company ownership is right for you.

1. The success of your business is solely in your hands

One of the biggest downsides of being your own boss is that your income and the success of your business solely rests on your shoulders. About half of all companies fail in the first five years, with 1 in 5 not even making it a year. This is a huge risk to take on, and it can be really frightening not to have the promise of a steady paycheck when you’re committing to expenses like a mortgage loan for your family home.

To make sure you’re comfortable with the idea of your income being solely dependent on how well your business performs, make a business plan detailing your path to profitability. You should think through details like how much money you need to operate, how your goods and services will be priced, how much time you can devote to making money for your business, and what your ongoing operating expenses will be.

You may also want to start your business while working another job and not give up other income sources until you’re confident your company can produce the funds you need to cover the bills.

2. You may have to work a lot more hours

When you own a business, you don’t have a nine-to-five job. Even if you hire employees to take on some of the work tasks, and even if you try to limit your workload, ultimately, you will be on-call at all times since you are the person most invested in the company’s success (and the person who ultimately has to solve any big problems that arise).

Around 1 in 4 business owners indicate their work weeks run 60 hours or more. While I no longer personally work that much, I did when I was just getting started. And there are definitely some weeks when I log well over 40 hours to help make sure I’m meeting my goals.

If you are starting a business because you believe it will give you a better work/life balance, you can’t count on that happening for a long time — if ever. If working fewer hours is your goal, sticking with a more traditional job may be a better fit.

3. There are no workplace benefits

When you work for an employer, you typically get access to several benefits ranging from a 401(k) plan to company-provided health insurance. These workplace benefits can be very valuable, with the Bureau of Labor Statistics indicating they account for around 31% of the average amount employers pay per hour worked in the U.S.

You aren’t going to get these benefits from a company if you work for yourself. You’ll be on your own for health insurance and retirement savings. And if you want to take maternity leave or go on vacation, you won’t have income during that time unless your business can operate without you.

You need to have a plan in advance for how you’ll deal without these benefits. For example, you should look into individual health insurance plans at Healthcare.gov, and explore self-employed retirement accounts.

4. There’s a lot of tax and regulatory issues to deal with

Finally, you have to be aware that running your own business isn’t just about selling your products or services. You have to comply with tax rules, including sending in tax payments to the IRS throughout the year since you have no employer to do it for you. You’ll also have to decide how to structure your business and do any paperwork necessary to incorporate or form an LLC, if you decide these business structures are right for you.

Before you jump into entrepreneurship, consider these downsides and form a plan to overcome them. If you can’t, owning your own business may not be the best fit for you right now.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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