Why I Didn’t Buy Facebook Stock

This is
G&G Associates
Tax & Financial Consulting Services
e-Newsletter

Why I Didn't Buy Facebook Stock

Karibu (Welcome) G&G Readers,

Would you pay $880,000 for a rental home?

You might… if it returned you $100,000 in rental income. With that yield, you'd make back your original investment back in less than nine years.

But what if the house paid you just $10,000 in rental income? At that low yield, it would take you 88 years to make your original investment back (provided you didn't finance the home).

It sounds insane that anyone would pay that much and agree to wait so long to get their original investment back. Yet that's what tens of thousands of people did last month when they piled into the Facebook stock.

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Over the past couple weeks, I've talked to nearly a dozen friends and family members about this. They know my about my business and how it involves investing and "the stock market." Facebook's initial public offering (IPO) was the first thing on their minds. Why? Because a lot of them are T.V. junkies who almost fell for the 'hype' … or better yet the 'okie doke.'

I'd like to say that the majority of my family and friends are not full of great investors and the greater part of them are not familiar with investing at all. In reality, they're normal folks who own a few mutual funds. They've read the headlines about the Facebook disaster. To them, asking me about it is like talking about a car accident they saw on the side of the road.

What shocked me was how complicated they thought it was. Someone asked me if Facebook was going bankrupt. Another friend wondered if the company is a fraud.

I said, "No… It's just an overpriced stock."

It was overpriced because thousands of people were suckered by the Facebook hype. While paying attention to the hype, they ignored one of the golden rules of investing: Don't overpay… for anything.

It's an odd thing about the stock market. Rational, intelligent people will agonize over the price they'll pay for a home or a car. They'll do a huge amount of due diligence. They'll look at a bunch of "comparables" to ensure they get a good price. They know not to overpay.

But that same person will run into the stock market and put $10,000 into a stock he hasn't researched at all. He won't pay a bit of attention to the price he pays for a slice of that company's assets and cash flow.

So he ends up getting soaked… because he doesn't focus on getting a good price.

Of course, there were other things involved with the Facebook debacle. But the BIG reason most folks lost money was because they overpaid. After losing money buying the most-hyped IPO in history, they've got no one to blame but "THEMSELVES."
"Inflated" is the perfect word to describe Facebook's valuation on its first day as a public company.

In 2011, Facebook earned $0.43 per share. Its opening share price on the day of its IPO was $38. That means investors were willing to pay "88" times earnings for Facebook. Put another way, they were willing to wait 88 years go get their original investment back (assuming no growth).
Now … you tell me does that make sense to you? Hopefully, not.

Granted, Facebook has plenty of growth ahead of it, but that's an absurd price to pay for a stock. If Facebook grew earnings by 15% every year (an astounding feat)… it would still take an investor more than 32 years to make their original investment back.

Facebook is a nice piece of "real estate," but not nice enough to wait that long.

As I mentioned, there was, and still is, a lot of complicated discussion about the Facebook IPO debacle. But the reason investors lost money is very simple: They overpaid. They paid a ridiculous price for the stock … plain and simple. If an investor would have stopped for five minutes to consider the valuation – like he/she would with any other purchase – he/she would have passed on the stock… and saved a lot of money.

The lesson is clear… and it's thousands of years old: Whether it's Facebook… a rental property… or any other asset, if you overpay, you'll get burned.

If you want to know how to protect yourself portfolio and learn how do achieve double digit returns, then you need to become a GGIS Subscriber. I will share many of these ideas here in the weekly G&G e-newsletter but if you want the meat, you need to become a paid GGIS Subscriber. Remember, if you sign up you get a free one hour financial consultation (a $200 value).

So … Sign up today!!!

Remember … "if you fail to plan, then you have planned to fail."

As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.

If you need a one-on-one consultation to learn how to implement these investments or any other on the GGIS portfolio, feel free to contact me to setup an appointment.

If you missed any past G&G newsletters, click on link below for the archive:
http://ezinedirector.com/admin/publisher/archive/public/?fuseaction=a&e=7944575E0843077440

Meda Ase p (Thank You Very Much),

Asar Maa Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
757-251-3757 office
866-361-3872 toll free fax
www.gngassociates.net

Become a Fan of G&G Associates and G&G Travel on Facebook.

"Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning."
J. Carter

P.S. If you are looking to Travel and looking for steep discounted travel, visit www.gngassociates.net, click on the "G&G Travel" link and let your travel planning begin. Let us know where you want to go and we'll do our best to find you the best deal your money can buy. Become a Fan of G&G Travel on Facebook.



LEGAL NOTICE: This work is based on what I've learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice.



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Maximizing your Employer’s Contribution w/i 401K (TSP)

This is
G&G Associates
Tax & Financial Consulting Services
e-Newsletter

Maximizing your Employer's Contribution
Within Your 401K (TSP)


Karibu (Welcome) G&G Readers,

GET FREE MONEY IF YOU WORK HERE !!!

If you saw an ad like that, you'd probably ask, "what's the catch?"

This is strictly on the up and up. Your employer may give you money every time you contribute to your 401k plan, if it offers a matching contribution.

"No fair," you may say. "That's like telling me to eat my vegetables before I can have dessert."

Yep…Sorry, but a little character-building never hurt anyone. Besides, would you leave a $100 bill lying on the street? Taking advantage of your employer's match may mean that you can retire sooner, or that retirement might be nicer than you originally expected.

Some workers don't take full advantage of the matching contribution their employer offers. According to the Profit Sharing/401k Council of America's (PSCA) latest survey of profit-sharing and 401k plans, more than 20 percent of employees don't contribute to their plans. Not all of those employees are in plans offering a match – but, about 78 percent of plans offer some kind of matching contribution, the PSCA said. Also, the figure doesn't count workers who contribute to their plans, but don't put in enough to get the entire employer match.

Your employer is not required to make any contribution to your plan at all. So, why are you passing on its generosity if it does offer one?

To get the full benefit of the match, it helps to know your plan's rules, including when and how to contribute. Here's what you need to know.

-------------------------------------------------------------
Internal Sponsorship:

To become a member of the G&G Investment Society (GGIS) newsletter subscription to learn how to take advantage of some of our suggestions so you can protect your wealth and portfolio against a fallen dollar, send an e-mail to GGIS@gngassoc.com and/or visit our website at www.gngassociates.net and click on the "Products & Services" link and we'll get you signed up right away.

DON'T WAIT ANOTHER DAY!

- 1 year subscription - $149
- 2 year subscription - $269
- Lifetime subscription - $699 {50% off tax prep & 25% off consulting services for life}

*** Membership Guarantee *** If you don't make your money back from being a GGIS member by the end of your subscription...we'll refund 100% of your subscription fee back. That's how confident we are that this will be one of the best financial moves of your life.

-------------------------------------------------------------


GET MATCHED

Many folks on a tight budget may think they can't afford to save for retirement. And an employer match may not seem generous enough to make it worth their while.

I repeat: IT'S FREE MONEY !!!

But, there's more to it than that. Consider the tax advantages. Here's an example to show how saving in a 401k with a matching contribution is affordable and profitable.

Suppose you are single and earn $30,000 a year. That puts you in the 27.5 percent tax bracket. For every dollar you earn you must pay 27.5 cents in taxes, leaving you 72.5 cents to live off.

Suppose you save that same dollar in your 401k plan. Because 401k contributions are made on a pre-tax basis, the full dollar goes into the account. But, at the same time, you have also reduced your taxable income by $1. That means you saved 27.5 cents in taxes and got a dollar in savings.

Sounds like a good "PLAN" right?

Now, suppose your employer kicks in an additional 50 cents for every dollar you contribute. (That's a fairly common match.) Your $1 contribution is now worth $1.50. (a 50% gain on your dollar).

Between the tax savings and match, saving $1 in your 401k plan gives you an extra 77.5 cents to put toward your future that you wouldn't have had if you took the dollar as income and spent it today. (But remember, you will pay income tax on the money when you withdraw it.)

Down the road, getting a match makes it easier to have a nice retirement. "It means you can retire sooner than you otherwise might be able to do, "ONLY" if you have an 'Obtainable' plan."You might be able to enjoy a higher quality of living."


MAXING YOUR EMPLOYERS MAXIMUM

So, how can you have your cake and eat it too? Especially since most employer sponsored 401K plans only average about 3-5% a year. Doubt my numbers check your plan or setup an appointment with me and I'll show you how.

The easiest way is to make sure you contribute enough to your 401k plan to get the full match. Most employers will only match a portion of your contributions.

A common match is for the employer to contribute 50 cents on the dollar, up to the first 6 percent of salary you contribute, according to the PSCA. Suppose your employer offers that match. If you earn $25,000 a year and contribute $1,500 (6 percent of your salary) you will get the full match of $750.

If you contribute beyond $1,500, say $1,750, that's good for your retirement future, but your employer won't match the additional $250. If you contribute less than $1,500, say $1,000, your employer will only match that amount and you'll leave dessert (money) on the table.

But, since most retirement plans don't realistically keep up with inflation, again average 401K return is (3-5%). What if you contributed enough to match your employer's contribution, then any above and beyond contributions to higher yielding retirement type accounts?

Seems like an even better plan … literally allowing you to have your cake "with icing" and eat it to. And let me caveat that … healthy icing since I'm watching what I eat.

Your employer's summary plan description will tell you what your plan's match is, or just contact your jobs human resource department so you can adjust your contributions. Still confused … contact G&G Associates to setup an appointment and we'll help you out.


MATCHING RULES: TIMING

To get the most out of your employer's matching contribution, you need to know when your employer makes the contribution.

Federal rules require employers to make their contributions to your account no later than the final tax deadline, plus extensions, for the tax year. So, you might not see a match reflected on your 401k statement for months after the tax year ends. Many employers, typically, make their contribution when you make yours.

Clients commonly ask … whether it's worth it to make all of their 401k contributions early in the year to get ahead.

It may not be. Some employers only make a matching contribution when you contribute. If you contribute everything early in the year, and then don't contribute during later months, you may miss out on matching contributions in the months you don't contribute. Check with your benefits department to find out how and when the match is made. Then, adjust your contributions so you get the full match.


MATCHING RULES: VESTING

It's also important to understand vesting rules for your employer's contributions.
Even though your employer may make the matching contribution at the same time you make yours, it may not be 'your property right away.'

While many employers make a match to entice their employees to join their company and to contribute to the plan, some require that you work at the firm a certain number of years before the match becomes your property. This is incentive to keep you on staff.

This is perfectly legal, and vesting requirements for employer contributions are common in 401k plans. However, you don't have to wait for your own contributions to vest.

The PSCA, points out that many employers don't recoup the cost of recruiting and training a new employee until after they have at least two years of service. "The companies want them to stay for a while. They use the (401k) plan design to encourage people to stay longer."

Plans have two types of vesting schedules: graded and cliff.

With graded vesting, you own an increasing portion of the employer contribution each year you are with your company. If your company had a five-year graded vesting schedule, you could be 20 percent vested after one year, 40 percent vested after two years, etc. By law, the longest graded vesting schedule a 401k plan can have for employer matching contributions is six years.

With cliff vesting, the employer contribution goes from zero to 100 percent vested after a set period of time. So if your vesting requirement is three years and you leave your company after two years, you won't get any of the employer contributions. Currently, the longest cliff-vesting schedule allowed by law for employer matching contributions is three years.

Because you may have to wait for your employer matching contribution to vest, you may want to delay a job change if you are a short time away from vesting.


WHY EMPLOYERS MATCH

Employers offer matching contributions for several reasons. The primary one is to get employees to participate in the plan. (It's sort of like your employer promising to give you dessert if you eat all your vegetables.)

Without a match, fewer folks are willing to save in the plan, which is understandable if you are only making 3-4% in your retirement. But again … free money is free money.

If you want to know how to protect yourself and learn how to take advantage of your employer's 401K plan, then you need to become a GGIS Subscriber. I will share many of these ideas here in the weekly G&G e-newsletter but if you want the meat, you need to become a paid GGIS Subscriber. Remember, if you sign up you get a free one hour financial consultation (a $200 value).

So … Sign up today!!!

Remember … "if you fail to plan, then you have planned to fail."

As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.

If you need a one-on-one consultation to learn how to implement these investments or any other on the GGIS portfolio, feel free to contact me to setup an appointment.

If you missed any past G&G newsletters, click on link below for the archive:
http://ezinedirector.com/admin/publisher/archive/public/?fuseaction=a&e=7944575E0843077440

Meda Ase p (Thank You Very Much),

Asar Maa Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
757-251-3757 office
866-361-3872 toll free fax
www.gngassociates.net

Become a Fan of G&G Associates and G&G Travel on Facebook.

"Investing is much like gambling. But, the difference is that with knowledge in investing you can at least increase your odds of winning."
J. Carter

P.S. If you are looking to Travel and looking for steep discounted travel, visit www.gngassociates.net, click on the "G&G Travel" link and let your travel planning begin. Let us know where you want to go and we'll do our best to find you the best deal your money can buy. Become a Fan of G&G Travel on Facebook.



LEGAL NOTICE: This work is based on what I've learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice.



Change Subscription:
http://sub.ezinedirector.net/?fa=m&s=123321332&c=965056389

Cancel Subscription:
http://sub.ezinedirector.net/?fa=r&id=123321332&c=965056389