Tag Archives: mutual funds

Retirement Planning: 4 Simple Steps

Guest Article By Syed Ali Zain-ul-Abideen 

For many, nearing retirement age can get frustrating and confusing. Many fail to properly get their finances in order to be able to enjoy retired life and thus, frustration takes root and tolls heavily on the person. being forty-five or fifty-five, very few people are satisfied with what they have saved for their retirement days. The list of regrets may not end there. Without getting an early start, many things can go wrong. Those that well into their forties and fifties are bound to lag behind. So, here are some practical and simple steps to getting really into retirement planning if you’re a professional, business owner or just someone who cares about the future!

Firstly, the lessons of life are learned by personal experience or by the experience of others. Smart people learn from the latter in order to never experience bad situations after retirement. The very first lesson to learn about retirement planning is to start saving sooner rather than later. It’s not complicated and it doesn’t require you to be a finance guru either. With some willpower, guidelines, and knowledge, planning your retirement can be easy, convenient and above all, blissful.

Invest

Every paycheck should have about fifteen percent invested into retirement. It can be a savings account or a small side business that, if managed properly, can become something to rely on later on. Retirement saving goals are great but enjoying less of your income today would enable you to afford expenses tomorrow! Forget about your employer’s retirement plan, your own gross income must have this percent stashed away in any form for the golden years ahead.

Recognize Spending Requirements

Being realistic about post-retirement expenditures will drastically help in acquiring a truer picture of what kind of retirement portfolio to adopt. For instance, most people would argue that their expenses after retirement would amount to seventy or eighty percent of what have been spending previously. Assumptions can prove untrue or unrealistic especially if mortgages have not been paid off or if medical emergencies occur. So, to better manage retirement plans, it’s vital to have a firm understanding of what to expect, expense-wise!

Don’t Keep All the Eggs in One Basket

This is the single biggest risk to take that there is for a retiree. Putting all money into one place can be disastrous for obvious reasons and it’s almost never recommended, for instance, in single stock investments. If it hits, it hits. If it doesn’t, it may never be back. However, mutual funds in large and easily recognizable new brands may be worth if potential growth or aggressive growth, growth, and income is seen. Smart investment is key here.

Stick to the Plan

Nothing is risk-free. Mutual funds or stocks, everything has its ups and downs so it will have ups and downs. But when you leave it and add more to it, it’s bound to grow in the long term. After the 2008-09 stock market crash, studies have shown that the retirement plans in the workplace were balanced with an average set of above two-hundred thousand. The grown by average annual rate was fifteen percent between 2004 and 2014.

Kewcorp financial is a premiere Sherwood Park-based financial planning team which has more than thirty years of experience in financial planning, investments, insurance and tax planning to name a few. Our professionals are industry experts and have the necessary knowledge and qualification along with the skill to secure your financial future.

Article Source: https://EzineArticles.com/expert/Syed_Ali_Zain-ul-Abideen/2317169

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What Is An Exchange Traded Fund and How It Works

Guest Article By Shashank Pawar

Investors seeking exposure to an index can consider ETF investing as an option. Exchange traded funds are one of the many types of mutual funds available today and gaining popularity among various kinds of investors. While you may be familiar with equity mutual funds, debt funds or balanced funds, ETFs are yet another class of mutual funds that function a bit differently. ETFs are mutual funds designed to mimic popular market indices like the Nifty 100, BSE 100, Sensex etc. These are passively managed funds that simply hold the stocks of the index they are supposed to mimic exactly in the same proportion as the index. Since the fund managers don’t take active calls in security selection by holding the same stocks as included in the index, these funds are passively managed.

Exchange traded funds are suitable for first-time investors who would like to test the waters and may not be comfortable with the higher risk associated with regular mutual funds.

There are several advantages of investing in an ETF. Firstly, being passively managed they make fewer transactions as compared to actively managed funds where the fund manager must constantly look for securities that can help him outperform the scheme’s benchmark. This leads to higher portfolio turnover resulting in higher tax incidence. Funds pay taxes like STT (Securities Transaction Tax) and capital gains tax while buying or selling securities within their portfolio. Thus, ETFs are more tax efficient and have lower costs arising out of fund management.

Secondly ETFs also usually have lower expense ratio compared to actively managed mutual funds which must employ highly skilled fund managers for generating active returns.

Thirdly ETFs offer more convenience and liquidity to investors since they are listed on exchanges and trade like stocks. Investors can transact in ETF funds any time during market hours at real-time prices unlike actively managed mutual funds where NAV is computed only once a day after the market closes.

ETFs offer better diversification since they carry all the securities listed in the index which are periodically rebalanced. But the reduced risk arising out of greater diversification in exchange-traded funds comes at the cost of possibly lower returns as compared to other mutual funds. Actively run mutual funds are more likely to earn a better return over the long-term than passively managed funds since the fund manager uses his expertise and takes active calls to buy better-performing stocks and sell underperforming stocks. But in the case of an ETF that mimics an index, all kinds of stocks are held including the underperformers.

ETF investors should consider funds with lower tracking error as a key performance indicator. Tracking error shows the deviation in return of a fund from its benchmark. Since these funds mimic their respective indices, tracking error should be close to zero. However, zero tracking error is impossible since it must buy or sell securities to align with the index whenever the index undergoes a rebalancing and hence must bear some transaction costs. However, indices have no such constraints. Investors keen on lower expense ratio and higher liquidity can consider including ETFs in their financial planning.

You can read more about ETF funds on Mutual Funds Sahi Hai, an investor education initiative by AMFI.

Article Source: https://EzineArticles.com/expert/Shashank_Pawar/2571655

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Which Mutual Fund Calculator Should You Use?

Guest Article By Bhagath Varma

There is no dearth of financial calculators available on the internet and sometimes novice investors get baffled by the sheer number of calculator links that come up for a simple search query like ‘goal sip calculator’ or ‘goal calculators’. How does then one choose the calculator that will precisely provide an answer to what the investor was looking for in the first place?

There are many calculators available on the internet that can help you find answers to some of your financial planning queries. But here is a list of the basic must-try calculators that everyone should try because these will help you understand the need for a financial plan in the first place and how should you start working towards your financial goals in life.

  1. Inflation Calculator
  2. Goal SIP Calculator
  3. SIP Calculator

If you are one of those smart investors who has already started planning for his/her life goals and have a few SIPs in place, this calculator is the one for you. It’ll tell you the future value of your SIPs and you can compare that with what the inflation calculator gives you. If the future value of your SIP comes out to be more than what the inflation calculator gave you for the same goal, you are really smart! But if the future value given by the SIP calculator turns out to be lower than what the inflation calculator shows, you really need to step-up your SIP now else you will be staring at a shortfall when the time to fulfil your goal comes.

These calculators are all that one needs to take stock of things at present and build a sound financial plan for the future. Once the plan is ready you need to act upon it with earnest. There’s an informative site by the name Mutual Funds Sahi Hai that can help you understand mutual funds better and guide you to build a good investment plan for your future.

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Harnessing Stock Market Volatility

Guest Article By Steve Selengut

If you were to Google “stock market volatility”, you would find a wide range of observations, conversations, reports, analyses, recipes, critiques, predictions, alarms, and causal confusion. Books have been written; indices and measuring tools have been created; rationales and conclusions have been proffered. Yet, the volatility remains.

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it? If you own only high quality income generating securities, diversify properly, and adopt a disciplined profit-taking routine, you can make stock market volatility your very best friend (VBF).

Decades ago, a nameless statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now, all economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

  • But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.

Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations, that the financial world itself has become, mundane, boring, and easy to deal with. Yeah, sure it has.

Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, continue?

I expect that you are expecting an opinion (yet another opinion) on why the volatility is as pronounced as it seems to be compared with years past. Frankly, Scarlett, I can’t really make myself give a damn. The uncertainty that we are asked to believe is caused by volatility just simply is not. Uncertainty is the regulation playing field of the investment game… and of life, actually.

The more you invest in higher risk securities, the more you speculate on future directional change, the more you ignore growing income, and focus only on market value, the more uncertain your investment environment becomes. So risk, speculation, poor diversification, low income generation, and up only market value expectations combine to exacerbate uncertainty, but nothing can eliminate it… only that is certain.

Volatility, on the other hand is simply a force of nature, one that needs to be embraced and dealt with constructively if one is to succeed as an investor.

But this machine driven, hyper-volatility that we have been experiencing recently, has been magnified by the darkest forces of the “dismal science” and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.

On the bright side, enhanced market volatility actually enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management ( MCIM ) methodology… an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.

  • MCIM focuses on the highest quality equity securities and well diversified income security portfolios, creating a lower than normal risk environment where price fluctuations can be dealt with productively, without panic. Higher prices generate profit taking transactions; lower prices invite additional investment. The underlying quality, diversification, and income generation create a more tolerable “uncertainty quotient” than other methodologies.

But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today’s stock market.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations.

Those of us who trade common stocks in general, Investment Grade Value Stocks in particular, owe a debt of gratitude to the real volatility creators: the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.

Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly, if at all.

Short term market movements are just as unpredictable as they have ever been. They continue to cause the uncertainty you need to deal with, by using proven risk minimization techniques like asset allocation, diversification, and profit taking.

The key change agents, the new kids on the block, are the derivative betting mechanisms (Index ETFs, for example) and their impact on the finite number of shares available for trading. Every day on the stock exchange, thousands of equities are traded, a billion shares change hands. The average share is “held” for mere minutes. No one seems to we seek out analysts who spin tales of “fundamental” brilliance, profitability, or income production.

On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What’s a simple common share of Exxon to do? I’ve heard financial talk show hosts warn listeners to never, not ever, buy an individual equity!

  • Is today’s movement in any individual equity the result of demand for the company shares themselves, or demand for the multiple funds, indices, and other derivatives that track or include the company in their “model”? How many derivative owners have a clue what’s inside their ETF?

We are in an environment where investors feel smarter dealing in sectors than in companies; where 401k “retirement” plans (they really are not retirement plans, you know) are banned by regulators from offering even reasonably high yielding investment opportunities, and where government fiscal policies have forced millions of actual retirement savings accounts to seek refuge in the shark infested waters around Wall Street.

Market volatility is here to stay, at least until multi-level and multi-directional derivatives are relocated to the Las Vegas casinos where they belong, until regulators realize that 7% after higher expenses is better than 2% after minimal expenses, and until interest rates are allowed to return to somewhat normal levels… and this is what feels to some like an elevated level of uncertainty.

For the discernible future, we’ll need to find a way, a methodology, that makes both of them our VBFs.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, “The Brainwashing of the American Investor”. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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Income Investing Fantasyland: High Dividend Equity ETFs and Mutual Funds

Guest Article By Steve Selengut 

Several years ago, while fielding questions at an AAII (American Association of Individual Investors) meeting in Northeast NJ, a comparison was made between a professionally directed “Market Cycle Investment Management” (MCIM) portfolio and any of several “High Dividend Select” equity ETFs.

  • My response was: what’s better for retirement readiness, 8% in-your-pocket income or 3%? Today’s’ response would be 7.85% or 1.85%… and, of course, there is not one molecule of similarity between MCIM portfolios and either ETFs or Mutual Funds.

I just took a (closer-than-I-normally-would-bother-to) “Google” at four of the “best” high dividend ETFs and a, similarly described, group of high dividend Mutual Funds. The ETFs are “marked-to” an index such as the “Dividend Achievers Select Index”, and are comprised of mostly large capitalization US companies with a history of regular dividend increases.

The Mutual Fund managers are tasked with maintaining a high dividend investment vehicle, and are expected to trade as market conditions warrant; the ETF owns every security in its underlying index, all of the time, regardless of market conditions.

According to their own published numbers:

  • The four “2018’s best” high dividend ETFs have an average dividend yield (i.e., in your checkbook spending money) of… pause to catch your breath, 1.75%. Check out: DGRW, DGRO, RDVY, and VIG.
  • Equally income unspectacular, the “best” Mutual Funds, even after slightly higher management fees, produce a whopping 2.0%. Take a look at these: LBSAX, FDGFX, VHDYX, and FSDIX.

Now really, how could anyone hope to live on this level of income production with less than a five or so million dollar portfolio. It just can’t be done without selling securities, and unless the ETFs and funds go up in market value every month, dipping into principal just has to happen on a regular basis. What if there is a prolonged market down turn?

The funds described may be best in a “total return” sense, but not from the income they produce, and I’ve yet to determine how either total return, or market value for that matter, can be used to pay your bills… without selling the securities.

Much as I love high quality dividend producing equities ( Investment Grade Value Stocks are all dividend payers), they are just not the answer for retirement income “readiness”. There is a better, income focused, alternative to these equity income production “dogs”; and with significantly less financial risk.

  • Note that “financial” risk (the chance that the issuing company will default on its payments) is much different from “market” risk (the chance that market value may move below the purchase price).

For an apples-to-apples comparison, I selected four equity focused Closed End Funds (CEFs) from a much larger universe that I have been watching fairly closely since the 1980s. They (BME, USA, RVT, and CSQ) have an average yield of 7.85%, and a payment history stretching back an average 23 years. There are dozens of others that produce more income than any of the ETFs or Mutual Funds mentioned in the “best of class” Google results.

Although I am a firm believer in investing only in dividend paying equities, high dividend stocks are still “growth purpose” investments and they just can’t be expected to generate the kind of income that can be relied upon from their “income purpose” cousins. But equity based CEFs come very close.

  • When you combine these equity income monsters with similarly managed income purpose CEFs, you have a portfolio that can bring you to “retirement income readiness”… and this is about two thirds the content of a managed MCIM portfolio.

When it comes to income production, bonds, preferred stocks, notes, loans, mortgages, income real estate, etc. are naturally safer and higher yielding than stocks… as intended by the investment gods, if not by the “Wizards of Wall Street”. They’ve been telling you for nearly ten years now that yields around two or three percent are the best they have to offer.

They’re lying through their teeth.

Here’s an example, as reported in a recent Forbes Magazine article by Michael Foster entitled “14 Funds that Crush Vanguard and Yield up to 11.9%”

The article compares both yield and total return, pointing out pretty clearly that total return is meaningless when the competition is generating 5 or 6 times more annual income. Foster compares seven Vanguard mutual funds with 14 Closed End Funds… and the underdogs win in every category: Total Stock Market, Small-Cap, Mid-Cap, Large-Cap, Dividend Appreciation, US Growth, and US Value. His conclusion:

  • “When it comes to yields and one-year returns, none of the Vanguard funds win. Despite their popularity, despite the passive-indexing craze and despite the feel-good story many want to believe is true-Vanguard is a laggard.”

Hello! Time to get your retirement readiness income program into high gear and stop worrying about total returns and market value changes. Time to put your portfolio into a position where you can make this statement, unequivocally, without hesitation, and with full confidence:

“Neither stock market volatility nor rising interest rates are likely to have a negative impact on my retirement income; in fact, I am in a perfect position to take advantage of all market and interest rate movements of any magnitude, at any time… without ever invading principal except for unforeseen emergencies.”

Not there yet? Try this.

*Note: no mention of any security in this article should be considered a recommendation of any kind, for any specific action: buy, sell, or hold.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, “The Brainwashing of the American Investor”. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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Which Portfolio Mix, Is Best For You?

Guest Article By Richard Brody 

When, it comes to investing, and/ or, personal financial planning, there is no such thing, as, one – size – fits – all! Depending on one’s age, needs, goals, priorities, risk tolerance, purposes, etc, the most appropriate strategy, may be determined, on a case – by – case, basis! Your total assets, liquid assets, income (from a variety of sources), job security, reserves, and personal, comfort zone/ level, are significant factors, to determine, the best path forward, for you, in terms of creating a personal, investment portfolio. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, which, mix, might make the most sense, for your specific combination, and set of conditions, and factors.

1. Risk tolerance: One of the first things to consider, is, your personal, risk tolerance. That means, in simple – terms, how might you balance, investing, and being able, to sleep, at night! Many people confuse terms, especially, when it comes to, mixing – up, the difference, between, growth, and income. How often have you heard, someone, declare, the growth – investments, they held, didn’t offer enough income, and/ or, income – focused investments don’t provide growth/ rising prices, etc? One must consider, how much risk, they are ready, willing, and/ or, able, to tolerate, and accept!

2. Goals/ objectives: Identify, clearly, your individual goals, and objectives, when considering your portfolio mix. Some goals, include: saving for a child’s education; creating a source, to purchase a future house; developing a retirement fund; etc. It makes sense, usually, to carefully, choose, the right mix of investments, for each objective. Achieving goals, generally, is easier/ simpler, when done, over a longer – period of time, so one might take advantage of the concept of Dollar Cost Averaging. This approach, often, minimizes overall – market risk, because, when purchases are made, at a specific point, every month, market fluctuation becomes far – less, relevant and significant!

3. Needs: We are individuals, and have our own needs! Avoid, trying to, Keep Up With The Joneses, because, what might make sense, for them, may not, for you, and what you need! Do you need, growth, present income, future income, or some combination, etc?

4. Small, versus, Large – Cap, equity: We often hear the terms, small – cap, versus, large – cap. This refers to the amount of capitalization, of the individual company, investment, or mutual fund. The value, and monetary stability, and strength of any company, may be a factor, in the safety, etc.

5. Bonds and Preferred Stock: Corporate bonds are debt, which companies use, to raise monies/ capital. Some are unsecured ones, but, generally, we consider, secured bonds (debentures), which are backed, by the finances of that company. Therefore, while, many consider, bonds, safe, that depends on, the quality of the specific company. Preferred stocks are generally, favored forms of equity, and pay a regular dividend. Most people, who invest in these two types of investments, seek consistent income. At this point – in – time, because of record – low, interest rates, existing bond prices, are high, because they were issued, when rates were higher, and the price of the bond, is adjusted, because, it determines the total yield.

The more you know, and understand, the better, you will determine the portfolio mix, which might, best serve your individual needs, goals, and priorities. Become a smarter investor!

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, conducted personal development seminars, and was involved in financial planning, for 4 decades. Rich has written three books and thousands of articles. His company, PLAN2LEAD, LLC has an informative website http://plan2lead.net and Plan2lead can also be followed on Facebook http://facebook.com/Plan2lead

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More About My Investing Strategy

I’m going to expand on the details of my investing strategy. Previous posts I have stated which stocks I prefer and basic outline of my criteria in selecting specific stocks to buy. Again, I’m going to state that I am a dividend investor and not a value investor. In my mind, the essential difference is that the value investor focuses on share price of the stock. The dividend investor focuses on whether the company issuing the stock pays dividends or not. I know that this is a very simplistic view, but bear with me.

As a dividend investor the price per share isn’t ignored. But it isn’t the primary importance. Just like the value investor, the dividends paid are not ignored, either, it’s just not as important as the price. The value investor looks for pure growth (i.e. increases in share price) even though they may plan on holding the stock for years. That’s how they view their stock holdings.

Dividend investors, at least for me, look at stocks growing in value also, but I also look at increasing the number of shares increasing by reinvesting those dividends that I receive. Value investors look to increase their stock ownership by additional purchases of the stock, especially during a DIP (Drop In Price). Again, this is another oversimplification.

To me the goal is to increase the number of shares I won with the minimal cost to me. Like a value investor, I will buy additional shares of stock on a DIP, otherwise I maintain my Divident ReInvestment Plan (DRIP). Basically, maximizing benefits and minimizing costs. When I review any potential stock to purchase I look at many factors.

  1. Does the company issue dividends? If no, I then move on to the next potential stock.
  2. If the company pays dividends, how much does it pay?
  3. How frequently does it pay dividends? Quarterly, monthly?
  4. What is the 5 Yr dividend growth?
  5. How long has it been paying dividends?

Once I get the answers to these basic questions, I look at the stock price. I then go through the similar analysis that a value investor goes through to determine if it is a stock to invest in or not. The stock may be one that I don’t feel is right for me at this point in time so I may put it on my Watchlist. Additionally, my strategy doesn’t just deal with buying stocks, I also have a strategy for when I should be selling. Because I am a dividend investor, dividends are key. If a company cuts/reduces their dividends two (2) period in a row, it becomes a prime candidate to be sold. I will now review the numbers in a different light and look at the stock to determine if there is a chance for the dividends to rebound. If in the they reduce it a third time or eliminate dividends, it becomes an automatic sell.

That’s my strategy for dividend investing in a nutshell. You may agree with it or you may not, but it is MINE. I really don’t have a hard and steadfast set of numbers for any of the quantitative elements. It really comes down to what I am comfortable with when I look at the numbers. To me stock selection is a subjective process, unique to the person. I may decide one way about a certain stock and you may decide another way. It has to do with how much risk you are willing to tolerate. Part of my strategy is to avoid high risk investments. How much risk am I willing to take on? Again, it’s subjective. I prefer ETFs over individual stocks for that very reason. If I buy individual stocks, I prefer an established company to a start-up. My tolerance of risk is tied to my timeline, which is now short. So, I don’t have much time to recover from any massive losses that I may incur. And lastly, my investment strategy is a “living thing”. As I progress and learn my investment strategy evolves and changes.

You can look at investment strategies from multiple people and take-away what you feel comfortable with and what lines up with your goals. Don’t let anyone else dictate what your strategy should be because if you find someone that tries to pressure you into adopting their strategy, keep digging and you’ll find out what their hidden agenda is.

Do You Want To Learn To Put Together A Portfolio For Big Dividends?

If you’re interested to learn how to put together a portfolio for big dividends then you need to start with this video. Like you, I’m in the process if learning everything I can about dividend investing. As I go through them I’ll feature the ones that I feel are the most useful and informative. If you want to see what other videos are available from Learn to Invest, click here. Enjoy the video.