Money Management

You should absolutely invest even if you don’t know how to pick stocks. Read on for a simple way to invest that allows you to start earning generous returns. 

Opening a brokerage account allows you to start putting money into the stock market. This is generally a good idea if you want to earn reasonable returns. Putting your money in the market is going to give you the potential to earn a much higher rate of return than a high-yield savings account or similar investments.

But, what if you don’t know how to pick stocks to invest in? Does it still make sense for you to open a brokerage account or will you be setting yourself up for failure?

Knowing how to pick stocks isn’t necessary to be a successful investor

Knowing how to pick individual stocks can definitely help you to maximize the returns you earn. But it is absolutely not a prerequisite for being a successful investor. In fact, many people who will make the most money in the market will never ever buy individual stock shares in a single company.

That’s because index fund investing can actually have better outcomes for the vast majority of people. Index funds are designed to track specific financial indexes and mimic the performance of those indexes. For example, you could buy an S&P 500 index fund which has the goal of tracking the performance of the S&P 500 financial index. That is made up of around 500 large U.S. companies from a wide array of different fields.

When you buy an index fund, you get a small ownership stake in all of the companies that make up the index. You get instant diversification. You also take on minimal risk if you pick the right fund. For example, the S&P 500 has historically produced average annual returns of around 10% (before inflation). Many people who are skilled investors can’t get those kinds of returns on a consistent basis.

In fact, one of the greatest investors of all time — Warren Buffett — recommends that most investors just put 90% of their investment money into an S&P 500 fund and the rest into short-term government bonds.

So, even if you don’t know how to pick stocks, you should open a brokerage account and find a low-cost S&P 500 index fund to buy. If you consistently put money into it and leave your money alone over time, you stand a very good chance of building wealth. Just $250 monthly invested in a fund earning 10% average annual returns could turn into close to $500,000 over 30 years.

There’s no reason to wait to open a brokerage account and get your money working for you

If you put off opening a brokerage account because you don’t know how to pick stocks, you may be waiting forever to get started investing. That’s especially true if you aren’t passionate and motivated about developing an investment strategy.

Rather than waiting until you’re a stock expert — and then perhaps seeing your portfolio perform poorly if you aren’t as much of an expert as you thought — get your brokerage account open today and start investing in an index fund with a proven track record. You may be surprised by how fast your money grows.

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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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You’ve found the right house, closed on your mortgage, and are all set to move. Read on to learn the most important factors when choosing a moving company. 

You’ve done it. You scrimped and saved a down payment, got your credit score in good shape, and got pre-approved by a few mortgage lenders. Then you found the right house, closed on the right mortgage loan for you, and now it’s time to move into your new home. Thankfully, you’ve set aside some extra cash to hire movers, because it’s a big job and you want to focus on tasks besides hauling boxes up and down stairs. Let’s take a look at what to consider when you’re deciding which moving company to hire.

Good reviews

The first information you’ll have access to when you’re looking for moving companies, aside from company names, of course, are online reviews through Google or Yelp. Aim for companies that have more than one or two reviews to get the fullest picture of how they do business.

And if you see the same rave (or complaint) repeated more than once, it’s worth taking seriously. If Company A has multiple reviews noting that the movers were late, while Company B’s reviews say movers showed up on time, you can likely trust their accuracy. You can also check the Better Business Bureau for reviews and a letter grade for the companies you’re considering.

Nearby headquarters

Odds are, you can call a national moving company with local affiliate offices and arrange for a move. But it’s a better idea to cut out the middle company and call your local movers directly. Bob Vila notes that this way, you’ll be assured that a company can actually send an employee to your home to see the lay of the land, so to speak, and give you an accurate estimate. You might also be able to verify the company’s existence by visiting its headquarters and seeing its equipment for yourself. You are less likely to be scammed by a fraudulent company if you think local.

Clear and reliable communication

If a moving company can’t be bothered to respond to a voicemail or contact form email when you inquire about an estimate, don’t hire that company. Clear communication is really the bare minimum when you’re hiring for any professional service. If your plans change before your move (say, you need to switch to a new date or time), you should be able to easily reach the company.

To that end, see how the company communicates with you from the very beginning. And ensure you get a reliable contact number for the day of — say, a business cellphone number from the person in charge of your moving day crew.

A solid binding estimate — in writing

Speaking of getting that estimate, make sure you get a real estimate from any companies you’re considering hiring. And get it in writing. Ideally, a prospective company will be able to send a representative out to your home to get a look at your actual stuff, as well as the layout of your home. That representative should also be able to work up a time estimate, so if the company’s pricing is per hour, you’ll end up with an accurate idea of how much it’ll cost.

If the company balks at giving you an estimate, that’s right — hire someone else. And it’s best to talk to multiple companies and get multiple estimates. Those estimates should be binding, but if they’re not, movers are required by law to adhere to the 110% rule, per the Federal Motor Carrier Safety Administration. This means the company is required to deliver your items for no more than 10% more than a nonbinding estimate.

No deposit requirement

It could be a red flag if a moving company requires a deposit to schedule your move, and it’s definitely a red flag if it’s a large deposit (over say, 20%). Bob Vila says it’s not common practice in the industry to ask for a deposit, and could indicate that the company is shady and intending to take your money and run, rather than showing up on moving day.

Trust your gut on this one, and if nothing else gives you pause, a small deposit to guarantee your moving day may not be a problem. But use a credit card to pay it, so you’ll be covered if there is a problem. Credit cards provide protection in the event of scams and fraud.

Insurance coverage

The FMCSA notes that interstate movers must be licensed and insured — you can check out companies using its mover search tool. Insurance requirements vary in different states, but it’s best to hire a moving company that is insured, so your belongings are more protected. Ask about insurance coverage, and if the company dodges your questions, that’s another red flag.

It can be a bit nerve wracking to put your earthly possessions in the hands of strangers, so definitely do your due diligence before you hire movers (lest you have a terrible moving experience like one of my colleagues had last year). The FMCSA has a handy page of resources for consumers hiring movers, so if you run into trouble, check it out. Happy moving day, and remember, this will all be over soon and you can settle into your new home.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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Paper checks have a lot of features. Read on for a breakdown of this payment method and how its various components work. 

Paper checks are still around, but they are being used less and less often these days — according to a survey by GOBankingRates, just 55% of Americans wrote one in 2022. I maintain a dwindling supply of paper checks that I purchased in 2016. I still dig into the checks occasionally, most often for paying my city’s government for the privilege of an annual on-street parking pass.

When was the last time you truly looked at a check and saw all the various numbers and spaces on it? Did you wonder what they all meant? Or maybe you’re younger than I am and checks are even less familiar to you. Let’s take a deeper dive into how paper checks work and why all their features are important to ensure money from your checking account makes it to the right destination. I’ll break down the parts of a check by whose information they reflect — your bank’s, yours, and the person you’re paying.

Your bank’s information

Your bank’s name will be printed on your check, sometimes alongside a logo. This will tell the check’s recipient where the money is coming from. If they would rather have cash than deposit the check into their own account, they may be able to take the check directly to your bank to cash it.

The bank must know which account the money should come out of, and that’s what your account number is for. This is printed along the bottom of a check, between two other numbers. The number to the left of the account number is an ABA (American Bankers Association) routing number, which tells the bank where to get the funds to cover the check. And the shorter number to the right is a check number. You can also find this number at the top right, and it’s there for security purposes.

Your information

Your name and address will be at the top left of your check. You might also have your phone number there. If you’re worried about your privacy, you could opt to skip the phone number, and even use a P.O. box address instead of your home address. There’s also a signature line for you at the lower right. This is another security feature, as your bank will have your signature on file and can compare it against checks you write. Don’t ever sign a blank check, or one that hasn’t been filled in yet, as this can open you up to fraud and money loss.

The payee’s information

At the top right of your check, you’ll see a line for the date. If you want your bank to process the check at a later date, you’ll need to notify it; otherwise, whenever the payee deposits or cashes the check, that’s when it’ll be processed. The payee’s sections of the check include the top line, which will say “Pay to the order of.” This is where you’ll fill in the name of whoever you’re paying.

You can further clarify the purpose of the payment using the memo line at the bottom left. For example, in the case of the check I wrote for my parking pass, I put the name of my city in the payee line, and “2023 parking pass” in the memo line.

Money amounts

You’ll also see two spaces for money amounts. There’ll be a small box to the right of the payee’s name line, where you’ll fill in an amount in dollars and cents, such as $100.00. Then you’ll need to fill in that same amount on a line under the payee’s line, writing out your figure instead: One hundred dollars and 00/100. If you don’t fill the whole line, it’s a good idea to run your pen through it, so no one can add additional money to this line.

Why two places to write the same amount? This will help your bank process the payment, in case one part of the information is difficult to read. If the amount written in words is different than the one written in numbers, your bank should use the payment line, rather than the box, as it’s easier for a scammer to alter your numbers than your words. Banks may also refuse to cash or deposit a check that has mismatched numbers on these lines, as it could be an indicator of fraud.

Why is all this information required?

As you just saw, a lot of bits and pieces of information go into a check. If you’re used to swiping a credit card for payment, you might wonder why all these are necessary. Well, a credit card is processed differently than a check. There’s a lot of information encoded in that little chip in your credit card and it’s shared when you tap, insert, or swipe at a payment terminal. For a check, the processing happens later, after you’ve written it and given it to whoever you’re paying, so all this information is required in order for that to occur as intended.

Paper checks are still very much alive and well, and some people (more than half of us!) still use them. This means there’s even still money in committing check fraud. Take care when you write paper checks, and be sure that all the information (both pre-printed and what you fill in) is accurate to ensure you’re safe from fraud.

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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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If you’re saving money for a home down payment, you should make sure it’s earning interest and safe from being spent. Find out why. 

When you buy a home, you’ll want to save money for a down payment. Most mortgage lenders require you to put at least some money down in order to qualify for a home loan.

Since it takes time to save up the funds for a down payment, you’ll need to keep that money somewhere as you work on getting the full amount you need to be ready to get your mortgage. For most people, the right place to put that money is a high-yield savings account. Here’s why.

Interest earned will help you grow your account balance

When you are trying to save for a home down payment, every little bit helps. That’s why putting your money into a high-yield savings account makes sense.

High-yield savings accounts can earn interest at around 10 times the national average rate. When you are putting aside tens of thousands of dollars for a home down payment, keeping the money in an account with a higher rate can make a big difference. Say, for example, you have $15,000 in the account. Over the course of a year, you’d earn about $600 in annual interest if your account was at 4%, but only $60.00 if it’s at 0.4%.

There’s no reason to give up hundreds of dollars in interest payments when a high-yield savings account is available and just as easy to use as a regular savings account.

Your money will be safe and free from risk

If you find a high-yield savings account that is FDIC insured, you will be protected against loss in case of a bank failure. Up to $250,000 in money is insured per person per account. This essentially means you cannot lose money when you put it into a high-yield savings account.

You can’t afford to risk losing the funds you’re trying so hard to save for your home. This is the main reason to put the money into a savings account rather than investing it in the stock market. While you could potentially earn a higher return on your investment by putting your funds into the market, there’s also a risk you could buy right before a market crash and lose your investment.

Although it’s inevitable that the market will eventually recover from a crash, as the market is cyclical, it may not happen before you need your money for your down payment. You don’t want to get stuck with less money than what you worked so hard to save when you find the perfect home.

The funds will be accessible when you find the perfect home

Finally, the last reason to use a high-yield savings account is because your money is accessible. Depending on your account, it usually takes a day or two to move the money from savings into a checking account. Or you may be able to wire the money directly from your savings account to the title company for your home purchase.

For all of these reasons, a high-yield savings account is definitely the best place for your down payment savings. Start putting your money into one today so you can get into your home ASAP.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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How does your IRA or 401(k) balance compare to the average person your age? Read on to find out. 

When you’re in your 20s, retirement may be the last thing on your mind. After all, at that stage of life, you may be busy trying to pay off lingering credit card debt while managing your bills and socking money away for things like taking vacations and, eventually, buying a home of your own.

But it’s really important to consistently fund an IRA or 401(k) plan starting in your 20s. Doing so could mean setting yourself up with a lot of money in retirement.

A lot of people in their 20s don’t have any retirement savings at all. But the average 20-something has a retirement savings balance of $35,800, according to Northwestern Mutual’s latest Planning & Progress Study. And if your balance is comparable, it means you’re in really solid shape.

A really strong start

It’s quite impressive to have $35,800 in retirement savings in your 20s given that you probably haven’t been working full time all that long. And you should know that even if you were to sit back and not add another dollar to your IRA or 401(k) between now and retirement, you’d likely end up with a lot of money.

The stock market has, over the past 50 years, delivered an average annual 10% return before inflation, as measured by the S&P 500 index. So let’s say your retirement portfolio is very stock-focused, and you’re able to score a 10% yearly return on your investments, too.

Let’s also say that you’re 29 years old with $35,800. If you were to leave that money invested at 10% a year and untouched until age 67, you’d end up with a balance of about $1.4 million.

This doesn’t mean, however, that you should stop adding money to your nest egg. Quite the contrary — if you keep up that good work, you might end up retiring with an almost unbelievably large sum of money.

In fact, let’s say you have $35,800 in savings at age 29, and you continue to add $300 a month to your nest egg between now and age 67. Assuming that same average annual 10% return, you’ll be looking at retiring with a whopping $2.65 million. Make it $500 a month, and you stand to retire with over $3.5 million.

What if you haven’t gotten started?

It may be that you’re in your 20s and you have a lot less than $35,800 in retirement savings. You may even have no savings at all. But if that’s the case, you’re not doomed. All you need to do is start funding your IRA or 401(k) sooner rather than later.

In fact, let’s say you’re 29 and want to retire at 67. Even if your current balance is $0, if you save $250 a month between now and then, you’ll wind up with about $1.1 million, assuming a 10% average annual return on your investments.

But do yourself a favor and start saving now. For each year that goes by, you lose out on critical growth opportunities in your IRA or 401(k). So while you don’t have to beat yourself up over having a lower or nonexistent savings balance, you should make funding your nest egg a priority, even with retirement being very far away.

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We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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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Mortgage rates aren’t directly tied to the Fed’s rate moves. Read on for what you need to know about future mortgage loan rates. 

According to most experts, the Federal Reserve is expected to start lowering benchmark interest rates next year. While mortgage rates will inevitably decrease as a result, the question of how much lower they’ll be is quite complicated. Here’s a rundown of the relationship between the Fed’s interest rate moves and mortgage loans.

The Fed is expected to start lowering rates in the not-too-distant future

First, the good news. The Federal Reserve’s policy-making board, the Federal Open Markets Committee (FOMC), is widely expected to start lowering interest rates after a rapid period of increases.

Even the Federal Reserve Board members themselves think interest rates are coming down. The latest projections of monetary policy by the members show a target federal funds rate of 5.6% at the end of 2023, which means that interest rates could still rise slightly from current levels. Beyond that, the members expect rates to drop a full percentage point to 4.6% by the end of 2024 and 3.4% by the end of 2025 on the way to a 2.5% rate over the long term. For context, the federal funds rate is currently set in a target range of 5%-5.25%, so this would be a significant decrease.

Investors seem to think rates could fall even faster. According to the CME Group’s FedWatch tool, which monitors derivatives markets, the median expectation is a target rate of 4%-4.25% by the end of 2024.

While interest rate projections will vary considerably based on the source, one important thing to know is that virtually all experts expect benchmark interest rates to be significantly lower at the end of 2024 and 2025 than they are today.

Mortgage rates aren’t directly tied to it

Mortgage rates certainly tend to move in the same direction as the federal funds rate, but it’s important to know that they aren’t directly tied. In other words, if the Fed raises the benchmark rate by 1%, mortgage rates don’t necessarily have to move by the same amount. In fact, it’s entirely possible for mortgage rates to decline when the Fed is raising rates, and vice versa.

As of this writing, there is a 1.64% gap between the 6.71% average interest rate on a new 30-year fixed-rate mortgage and the effective federal funds rate. On the other hand, at the beginning of 2022 when mortgage rates were near record lows, the difference was about 3%. Back in 2010, the difference between the average mortgage rate and the federal funds rate was about 5%.

If the current spread holds, and the federal funds rate drops to 3.4% by the end of 2025, it would result in an average mortgage rate of about 5%. On the other hand, if the spread widens to 3%, which is more in line with historical norms, the average mortgage rate wouldn’t be much lower than it is today.

The bottom line

There are a lot of factors that determine mortgage rates besides the Federal Reserve’s interest rate moves. Lenders’ perceived risk is a big one, and supply and demand for loans is another, just to name a couple. And it’s also worth noting that the historical average mortgage rate is in the 6%-7% range, and there have been times when the federal funds rate was lower than it is now and mortgage rates were even higher.

In a nutshell, if the Fed lowers interest rates, mortgage rates should follow. But there’s no way to know how much they could fall.

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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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