Before choosing whether to invest in real estate or stock, one has to weigh the pros and cons. The Condo that Rich and Kim wish to invest in is real and tangible. Real estate investment has had an average return of around 8.6% in the past years. Real estate has generated a wealth and long-term appreciation for many people. The benefits of investing in real estate include a tax deduction and the chance to sell the property through the 1031. One does not pay for capital gains when the money is invested in a similar kind of stock. The drawbacks of real estate are that it is illiquid, the buyer has to hold on to the property for a few years before they realize any true profit. The closing cost of a property can add up to thousands of dollars and includes commissions, tax and fees for the agents. The real estate market stays flat or appreciates, but there have been instances where the market has gone down.
Stocks are the other investment option for Rich and Kim. The average return on stocks has been 13.6% in the past years, which is higher than the returns on real estate. However, the stock market is quite volatile compared to the real estate market. Stocks are liquid that means they are quick and easy to sell. Most stocks do better in one year than real estate does, and it is not uncommon to see companies averaging between 20% to 50% growth in one year. On the flip side, the volatility can easily work against the company there bankruptcy is always a fear in the back of ever investors mind with active stock. Due to the reasons stated above the recommendation is that Rich and Kim invest in stocks for several companies. The liquidity of the stock will give the possibility to test the market and the returns gained from the stocks. The returns can be put in a savings account and later used to invest in the real estate market for long term profits.
The choice on whether to invest in stocks currently is also one that needs to be considered. The state of the market determines if the stocks invested will bring in returns to the investors. The stock market is in a good cycle, according to historical patterns. The market is currently in a period where the stocks rally. The last time the stocks rallied the returns were up to 399%. It is important to note that when investing in the stock market a proper research on the stocks to invest is done. The choice of the stocks that an investor has invested in will be the deciding factor on the returns that the stock will return on the investments. The recommendation for the suitability of whether it is a good time to invest in stocks is that it is an appropriate time to invest, but the before investing proper vetting must be conducted.
The option of investing in brokerage is also a consideration for Rich and Kim, who have an account at a brokerage firm. Full cost brokering is a choice of brokering where the clients have to pay the full cost to the brokering company, but they also receive advice on which stocks to invest in from the company. The brokers are paid a commission depending on the amount of securities that are traded by the clients. Discount brokerage allows investors to buy and sell online at a much lower cost that full cost brokerage firms. These firms, however, offer fewer services to the consumers and give no advice on the stock to be used. Electronic brokerage is a type of brokerage that allows the buying and selling of securities electronically. Investors have access to online trading software that allows trading securities electronically.
These options are all open for Rich and Him, but the best option they can consider is electronic brokering with the company. Investing some of the money in securities will increase the chances of Rich and Kim to be successful in making returns on money invested.
For the stock portfolio, the recommendation is that Kim and rich invest 50% of their net worth. This reduces the risk they will get in the long run if the stocks do not do well. Rich and Kim currently have 150000$ as cash and $125000 as savings in the bank. This is the money that is recommended to be invested in stocks with the money in Vanguard being used for brokering. 50% of this money is 137500. The investment advice is to buy 100 shares from each of the companies and to observe how the shares perform after which more can be bought while others are sold.
The companies whose stocks are optimal for investments are: Polaris Industries, which has an expected total return of 20.9%, the current dividend price is $135.9, and the expected price is $156. The cost of 100 shares is $13590.
The next company is VF Corp, which has an estimated return of 21.4%, and current the dividends are $59.85, and they are expected to become $69. The cost of 100 shares is $5985. Harley Davidson Inc is the next company with an expected return of 21.9%. The stocks currently cost $66.64 with a target price of $74. The cost of 100 shares is $6664. American Express Co, follows with a return of 24.2%. The stocks currently cost $86.22 and have a target price of $104. The cost for 100 shares is $8622. The fifth company whose stocks to invest in are Mead Johnson Nutrition with a yield of 28.4% with the current price of $84.45 and a target price of $104. The cost of 100 shares is $8445. Starbux Corp follows closely with an estimated return of 31.1% current price of stocks is $70.15 with a target price of $89. The cost of invested 100 shares is $7015. Las Vegas Sands is seventh with an expected return of 32.7%the current price is $76 with a target price of $96. Investing in 100 shares would cost $7600.MasterCard Inc is the eighth company with an expected return of 33.1%, and the current market price is $74 with a target price of $91. The cost of 100 shares would cost $7400. Boeing Co is the ninth company with an estimated return of 33.5%, and the shares cost $127.92 and an estimated price of $160. Buying 100 shares would cost $12792.Lastly, the Black Stone Group, which has an estimated total return of 38.3%. The stocks are currently $31.40 with a target price of $40,the cost of 100 shares would be $3140.
When choosing the stocks, a couple of factors were considered to ensure the best stocks were chosen. The stocks were close to their 52 week low and were on an upward trend which indicated that the investors would quickly get returns on the stock. All the stocks chose had a dividend yield, which indicates that the shareholder receive a certain amount of money each year in relations to the amount of money the investors invest. Before selecting companies, the behavior of the CEO’s and executives in the company was studied. Executives’ buying the company’s stock is a sign of good tidings, however, if the executives are dumping the stock this is a sure sign of a failing company. The cost of the stock is also a major factor that was put under consideration, because very expensive share has very little room to appreciate. Stock that are much cheaper has more likelihood to appreciate in value.
Another factor that was considered was the target price of the stock. The target price will give the investor a chance to determine the possibility of the stock bringing returns in the near future. Higher target price than the current cost price is an indicator of good financial health. The volume of the stock should also be around 50000. Before a stock is bought, one should also check the P.E ratio, and it should be 1x and 10x. Finally, the stocks that were chosen were those of companies that are constantly not in the news. Companies that are constantly in the news have a higher stock price which is not an indicator of the general financial health of the business. All these factors together were used to determine the suitability of the stock for Kim and Rich to invest in, with the hope that the returns on these stocks will achieve the goals.
As Rich and Kim invest in the companies, the following is a summary on each of the companies. Polaris is a motor vehicle company that manufactures snowmobiles, neighbourhood vehicles and ATV that has its headquarters in Medina Minnesota. Polaris is publicly traded on the New York stock exchange and has a net income of $147.1 million and has 300 employees.
VF Corp is a clothing corporation that sells Jeanswear, underwear, workwear and Daypacks. The company’s head offices are in Greensboro, North Carolina and is traded on the NYSE. VF Corp has 58,000 staff and has a net income of $1.2 Billion. Harley-Davidson Inc (HOG) is a motorcycle corporation that was founded in Milwaukee Wisconsin. The motorcycles built are normally over 700cc. The company boasts 6000 employees and has a net income of $599.1 million.
American Express is a multinational financial services corporation with headquarters in the New York City. It is one of the subsidiaries of the Dow Jones Industrial Average. The company is best known for traveler's charge, credit cards and charge cards. The company has 62800 employees and has a net income of $5.3 billion.
Mead Johnson is a nutritional company that is best known for producing infant formula both in the US and worldwide. The company’s headquarters’ are in Glenview, Illinois. The company’s markets their products under the flagship product Enfamil. The company has 5600 employees and had global sales of $2.83 billion in the year 2009.
Starbucks Corporation does business under the name Starbucks coffee and is the largest coffeehouse company in the world. Starbucks has had 20737 stores in 63 countries and territories. The company’s headquarters’ are in Seattle, Washington. The company has 130000 employees and has a net income of $8.8 million.
The Las Vegas Sands Corp. based in Paradise, Nevada is a casino and resort operating company. The company is a leader in developing destination properties.The company has several resorts in Us and Asia. The company has 40000 employees and has a net income of $1.52 billion.
MasterCard Incorporated, a multinational service provider that deals in the processing of payments between banks and merchants. It is also involved in the issuing of debit and credit cards to make purchases. The company has a net income of 3.1 billion and has 8200 employees.
The Boeing Company is a multinational corporation that designs, manufactures and sell aircrafts. Boeing products include fixed wing aircrafts, rockets, satellites and rotorcraft The company is the second largest aerospace and defense company. The company has 168,400 employees and has an income of $4.6billion.
The Blackstone Group is multinational private equity, investment banking, financial services and alternative asset Management Corporation based in New York City. Blackstone equity has been one of the largest investors in a leveraged buyout transaction. The company has a net income of $0.28 billion and has 1500 employees.
Conclusion
The extensive information on the companies and the reasons why the companies were chosen is adequate to give Rich and Kim the knowledge they require before they make a decision on which area to invest. The choice of stocks is the best choice at the moment as it will not interfere with the salaries of the couple and may increase the amount illiquid assets that the couple has. Stocks would give them dividends each financial year, whether the company has gained or lost which Rich and his wife Kim can either chose to invest further or pay their mortgage on their current house they live. In stock, Kim and Rich will be able to diversify their money to minimize the risk of putting hopes and dreams on a single project investment that may fail. Investing in stocks makes you part and parcel owner of a company which gives you an edge in business.
