Investing In New Media


It sounds like free money:  Everywhere you look, people are glued to their mobile phones, whether they’re in line at the post office, watching TV in their living rooms or cutting you off during the morning commute. All you have to do is throw some money at the stock offerings for Facebook or Twitter and wait for the cash to start rolling in, right? But, if you’ve checked recently, Twitter’s stock has plummeted, they’re laying off workers and investors are panicking. Facebook had the same growing pains, and anyone old enough to remember Y2K also knows the names etched on the gravestones in the social media graveyard: Friendster, Myspace, Google Buzz, etc.

How can you protect yourself from disaster without missing out on what appears to be the wave of the future? You don’t want to end up kicking yourself because you missed out, just like you don’t want to kick yourself for buying too much. Below are some tips for investing in emerging technologies without losing your shirt. 

1. Understand the product.  You’d never buy Coca-Cola stock if you didn’t know what a soft drink is, so don’t buy stock in social media unless you understand their business. Social media sites are in the business of selling data to advertisers.They make their money by developing sophisticated algorithms that claim to understand you very well, so advertisers don’t have to spend big money to broadly distribute their message. What this means is that users are the product and advertisers are the customers. 

Facebook and Twitter have very different ways of displaying content to users, and therefore have different pitches when they talk to advertisers. The best example of the difference between the social media giants is from summer 2014: Facebook was filled with Ice Bucket Challenge videos while Twitter was full of unrest in Ferguson, Missouri. At the time, this was seen as an indictment 

of Facebook: Its vaunted algorithm was weighted too heavily to favor users’ immediate network and content that utilized Facebook add-ons like its video player.  Twitter was correctly identified as the better medium for serious news. In retrospect, the seriousness of Twitter is its problem – users go to Twitter for news, revealing less of themselves and making themselves less easy to target for ads. 
2. Understand the market.  Facebook is preferred by Baby Boomers, while Twitter is preferred by millennials, mostly because Boomers (their parents) are on Facebook. As of right now, Boomers are a more lucrative market because they have higher incomes and net worth. However, over the next five years, Millennials are expected to comprise more than half of all workers in the country and have an even larger share of personal spending. Boomers will be retiring as millennials are buying houses, minivans, golf clubs and all of those markers of suburban middle age. They can’t just buy coffee, cellphones and tattoos forever.
If you’re buying Twitter stock, you’re planning on holding it until the millennials come of age, and therefore you’re betting on Twitter figuring it out over the long term. If you’re buying Facebook, you’re planning on selling sometime before the Boomers disappear from the workforce. Remember, all of those headlines about Boomers spending more in retirement are looking at Boomers at the beginning of retirement – when time seems ample, energy seems infinite, and all of those hobbies put off for decades need new supplies.  Even America’s most mercurial and surprising generation will eventually succumb to the comforts of retirement. 
3.  Understand the risk.  There’s never been a guaranteed safe play in the history of tech stocks. It’s doubly so for social media. Bear in mind that Facebook and Twitter compete directly with Google, Microsoft and increasingly with Apple for generating data to sell to advertisers. Of those companies, Google has always been tethered to the massive losses from YouTube, Microsoft took a major hit with its antitrust suit, and Apple nearly went belly up during Steve Jobs’ absence. It’s easy to read that last sentence as a list of great businesses beating the odds and overcoming adversity, but it ignores all of the companies that failed to do so.  Buying Facebook or Twitter is going to be risky.
There are lots of ways to combine those three ideas to better protect yourself. If you want to offset risk, there isn’t much of a better investment than the savings products we have at Destinations Credit Union. Take a look at the Kasasa Saver account you can pair with Kasasa Cash Rewards Checking! By stocking up on our certificates or a High Yield Account, you can use low-risk investments to protect yourself, while still getting a higher return than one of those corporate banks can offer. Check out our rates.

If you’re worried about the time involved in your investment, our savings products can help there, too. If you’re buying Twitter now, you’re making a deal with yourself that you won’t sell it too soon and miss out on profits. But what if you need the money soon? Our Kasasa and High Yield accounts have no penalty for withdrawing your cash if you need it, helping put your mind at ease.

Whatever your plan for investing, we can help you fill out your portfolio to help you reach your goals. Just give us a call and let us know what you want to do. We’ll sort out the rest.
Sources:

http://www.americanpressinstitute.org/publications/reports/survey-research/millennials-social-media/ 

Investing: Zagging


When you talk to your friends and neighbors about investment strategies, you probably hear a lot of the same ideas. People tend to invest some amount in blue chip companies, their employer, mutual funds, 401(k)s, IRAs, 529s, and money market accounts. As you look around, you might notice that everyone looks kind of similar. They may be wearing the same casual clothes you made fun of your parents for wearing a few years ago. And you may begin wondering if investment strategies are like Old Navy cargo shorts … something we all do without thinking about it.
It’s fun to imagine a backyard barbecue for money managers – well, it’s more fun than attending a backyard barbecue for money managers, anyway – and wonder if they have the same investment conversations we do.  Do they all do things basically the same way?  Is the distinction between these professionals as simple as how they slice the pie?

In contrast, whenever one of our friends makes a great investment, they hold court at the cookout. They tell us about the detective work they did or their amazing insider info, and we eagerly gobble it all up. The same thing happens with the pros.  When one investor makes a counterintuitive trade that pays off, they become famous and charge a fortune in fees for their new fund.  The easy lesson is that when everyone else is zigging, it’s time for you to zag. Unfortunately, when everyone else zigs, they probably have a good reason for it, and zagging is a bad idea. 

The kinds of high-risk investments that sound cool at a barbecue can bring a great return, but they rarely pay off. It might not feel like it, but there are actually many more people at the barbecue who lost money zagging than there are people who made money. They’re just not going to gather everyone around to tell them about it.  In fact, 8 of 10 fund managers failed to beat the market average last year, according to CNN.

Think about it this way: If you have 100 investors and 90 take the well-trodden path full of CDs and index funds, 10 others are taking odd risks and following their gut.  If 90 percent of those people lose their money, that’s 9 out of the 10 idiosyncratic investors who lost money. If you do that again next year, that person needs to try something new again and has, once again, a 10 percent chance of success.  


Then, imagine the same scenario the following year.  The likelihood that this person can make big money three years in a row in this scenario is one in a thousand.  If you expand it to five years in a row, the odds drop to one in a million.  If it seems like there are too many investment experts living off a vast fortune for the odds to be so low, remember that the United States is a country in which being one in a million means there are 300 people exactly like you.  

That diverse and boring portfolio is your best bet for bringing in the steady return you want. So, while it might be as boring as cargo shorts, remember that no one likes the neighborhood dad who always shows up to a casual barbecue wearing a fancy jacket and trousers either.
Sources: 

The Financial Lessons Of Donald Trump



Over the last 30 or so years, only a handful of people have entered pop culture simply because of their wealth. We know Warren Buffett, although he’s more famous for investing than he is for being rich.  Bill Gates is famous for being rich in many ways:  He’s referenced online in various scenarios revolving around the mathematics of his wealth — people calculate how much money he’d have to find on the street to make it worth his time to pick it up.  But Bill Gates is rich because he co-founded Microsoft and his philanthropic efforts ensure he will be remembered forever in a way that someone famous solely for being rich would not.  Therefore, there are only a couple of pop culture figures who truly are famous because of their riches:  Paris Hilton and Donald Trump. 
This article is about the financial lessons of famous individuals, so we’re going to ignore Paris Hilton, if only because the first rule would be “be born rich” and rule two would involve sacrificing every part of your humanity for fame.  Trump, however, is currently running for president of the United States, and the reason he has become part of the national conversation about the most important office in our country is the notoriety he has earned in the last 30 years for being rich.  So, what lessons can we learn from Trump’s personal biography that can help the rest of us reach our goals? 

Stick to your guns – Whether you plan to vote for him or not, Donald Trump’s career has been trending up for nearly three decades.  Not every famous person can run a reality show, not every reality show goes on to become incredibly successful, and even fewer can turn their reality show notoriety into a political career.
Trump attracts attention and popularity by speaking in bold declarations, whether that’s on TV or during political debates.  He sticks to his guns by following a path that only he can see.  How many commentators thought he wasn’t serious about the presidency?  How many still do?  You don’t have to agree with him to understand that absolute certainty is a kind of charisma, and faith in oneself is an absolute necessity to getting rich.  How many great ideas have you had but never followed through on?  What about that great business idea you never pursued?  That project at work that you couldn’t sell to your boss?  Even when you’re wrong, believing in yourself carries a lot of gusto. 
Use someone else’s money – Trump, like many of the other famous-for-being-rich celebrities, was born with money.  In fact, just about every article about Trump’s money discusses the idea that he started with money and still had to file for bankruptcy, as if that were a sign that he’d made a mistake. In this country, we have a complicated system designed to assess risk and defray those risks throughout our system, which rewards risk takers and minimizes the negative outcomes of a mistake. Bankruptcy is sometimes viewed as part of that process, which is why so many European countries have modeled their bankruptcy procedures after ours.  We’re not suggesting you go bankrupt or put yourself in such a position.  Instead, we’re suggesting that Trump took a calculated risk using loans and investments to speed up the growth of his real estate business.  Understand your risks, and don’t be afraid of them.  Use loans and investments, not your savings. Loans – when handled responsibly – can help you start a business, increase the value of your home or go back to school. If you wait until you can afford it, you may never get there.  Let us know what you want to do, and we’ll find the loan that will help you get it done. 
Accept your limitations – Donald Trump continued to call for Barack Obama’s long form birth certificate long after the rest of the country was satisfied with the president’s documentation. When he offends people, he doubles down instead of apologizing. Perhaps nowhere does he teach us the lesson of not accepting limitations better than his hair.  Like many men of a certain age, he’d be better off bald than trying to hide his hairline. 
First, it might be time for an honest look in the mirror.  Second, it’s time to identify your strengths and play to those instead of compensating for your weaknesses.
Don’t be Donald Trump’s hair.  If you take nothing else from this article, maybe that should be it. You need an honest friend who can tell you you’re not hiding your weakness and help you figure out a better solution, like a trip to the salon. 
Whether you need help supporting your million-dollar idea, a loan to build up your investment in your home or an honest friend who can show you where your portfolio is weak, let us know.  We’ve got professionals ready to help. 
Please note:  Destinations Credit Union does not endorse any political candidate as an organization.  The intent of this article is to look at personal financial issues.

Straight Outta Excuses: The Financial Lessons Of Dr. Dre


With “Straight Outta Compton” being the box office surprise of the summer and a new studio album filling America’s iPhones for the first time since before iPods were invented, Dr. Dre is experiencing a late-career renaissance. While rappers’ careers are notoriously shorter than almost any other group of musicians, Dr. Dre is relevant for the fourth consecutive decade.  Perhaps even more surprising than his prolonged musical success is his financial success. With the 2014 sale of his iconic Beats headphone company for $3.2 billion, his share of the company vaulted him into uncharted territory: He claims to be rap music’s first billionaire.


Let’s take time to examine Dr. Dre’s personal narrative and see what lessons we might glean, because no matter who you are while you’re reading this, you almost certainly started with more than he did and currently have less. We could all use a prescription from this doctor.

Pursue your goals with drive and clarity.  One of the themes of Dr. Dre’s life is that he has followed his own vision, no matter what other people are doing. The biggest rap acts when Dr. Dre started were flashy pop-infused showmen like MC Hammer and Vanilla Ice, but he wanted to make serious music about the world he experienced. When he backed Eminem in the late 1990s, the idea of a white rapper was seen as a novelty, but Dr. Dre ignored appearances in favor of his faith in his ability to identify talent.  In each case, Dr. Dre believed in himself, understood what his goals were, and did what needed to be done.  

What are your goals?  Do you want to retire to the beach?  Do you want to ditch the rat race?  When you pass that billboard with the giant Powerball payout, where does your mind wander?  Let us know. We have ways to help get you there.  We may have expert advice because we’ve been there before.  Don’t be embarrassed if you think it’s crazy: It was crazy for Dr. Dre to get a local criminal, Eazy-E, to bankroll his band, but it was still the right move.  Let Destinations Credit Union be your Eazy-E (without the criminal background, of course).  Step one to your goals is call or e-mail us.

Be careful who you trust with your money.  One person who never comes out looking well in the Dr. Dre story, whether in Straight Outta Compton, Behind the Music, or even the US legal system, is Suge Knight.  The erstwhile villain of the film’s second act, Knight’s character uses violence and intimidation to force Dr. Dre to move on from his record deal with almost nothing.  Less violent is the film’s depiction of Jerry Heller, but the fictional version of N.W.A.’s manager is portrayed as similarly unscrupulous.  Everyone seems ready to steal Dr. Dre’s money.

Even among friends, money can make enemies.  The infamous early-1990s feud between Eazy-E and Dr. Dre had deep roots in questions of trust and money that poisoned the shared bond between N.W.A.’s most famous members.   

Who do you really trust with your money?  We all have people close to us to whom we might “lend” money without ever expecting it back, but how many people would you trust to hold your next mortgage payment for a few weeks? Bonds of friendship and family often fall apart when it comes to money.   As your credit union, we know you’ve put your faith in us to take care of your money.  You already know we exist by the members and for the members rather than a board of executives or stockholders, but it’s worth the reminder that our model was built to make sure you have someone you can trust.  We promise to live up to that trust every day.  

Own something that matters to you.  Dr. Dre didn’t get rich working for someone else.  Dr. Dre got rich making his own label, signing his own acts, then doing it all again.  Without releasing an album between 1999 and 2015, he still made a fortune by owning the label that released albums by Eminem, among others.  He didn’t earn his mega-wealth endorsing Beats headphones; he owned a large chunk of the company.  

What do you own?  Do you own your home?  Do you own a business? Do you own a share in your success?  Risk can be scary, and hanging out a shingle can be risky. But in exchange for risk, you are entitled to the fruits of your labor, and those can be fantastic.

If you want to own something that matters and set goals based around your family, you can offer them a home that is safe, comfortable and inviting.  You could take steps to improve the curb appeal of your house, to make your home easier to sell if you pass, add a movie room to transform those Saturday night Netflix sessions into unforgettable family experiences, or even buy a pair of Jet Skis to entice the grandkids.  You can check out our fantastic home equity rates.

Dr. Dre has been part of our lives for so long that we don’t really think about him much.  In a lot of ways, we forgot about Dre.  But his story is really extraordinary, and if we take a few minutes, we can probably learn some lessons from him for our personal financial health.

Sources:

http://www.dailymail.co.uk/news/article-3209565/Straight-Outta-Compton-wrong-says-man-created-NWA-band-s-manager-says-film-s-hero-Dr-Dre-broke-black-Beatles-Ice-Cube-joined-Suge-Knight-used-death-threats-help.html

What School Doesn’t Teach You About Money


With the new school year either here or just around the corner, it’s time to fill your shopping carts with #2 pencils, protractors and all the goodies the kids will lose by the second day of school.  If they’re headed off to college, it can be even more exciting. But, instead of needing you to replace their pens on day two, your college-aged child will probably be calling to ask for money by then. 

It’s such a ritual that, at this point, many of us don’t really question it. But how much do our kids actually know about money?  You might want to only include the lessons you taught them, because their school probably didn’t teach them much at all.

Common core and other national guidelines don’t include requirements for teaching budgeting skills, how to balance a checkbook, or even explanations of basic concepts such as credit, loans, or mortgages. Basically, the last time your children learned about money at school, it probably involved finding out how many apples and oranges they could buy in some middle school math word problem.

We talked to some credit union members about the lessons they want to pass onto their kids, and below you’ll find some of our favorite lessons to teach your kids. 

  • Pay yourself first.  No one else is going to make you a financial priority, so don’t make them your financial priority.  
  • If you want to know if you can afford something, check your budget. If you have to check your checking account, you can’t afford it.  If you reconcile your accounts every month, you’ll have a pretty good idea how much is actually in each account.  But having enough money isn’t the same thing has having enough money.  Plan ahead. Make a budget. Execute the plan by sticking to that budget.
  • Take risks while you’re young.  You can afford to be more aggressive with your retirement and college funds while you have plenty of time to make it back up, so don’t be afraid to push those funds a little bit.  That said, not saving for retirement is not a risk. It’s just a bad idea.   
  • Make sure the Joneses are keeping up with you.  It’s easy to get lost trying to compete with your peers and almost as easy to ignore those consumer pressures entirely.  But what about the third option?  Instead of ignoring their financial situation, check in every now and then to see if they need help.  Our communities are better when we care about each other.

Whether your kids are in diapers or their kids are wearing them, it’s never too early or too late to teach financial literacy.  Make sure you’re instilling the right lessons, and check back in with Destinations Credit Union, because we’ve always got plenty of resources for young people to learn the lessons they aren’t getting in math class.