Chris Hill: Hey, thanks for watching! Coming to you from Fool
global headquarters in Alexandria, Virginia. I'm Chris Hill, joined by
Robert Brokamp and Jason Moser. Thanks for being here, guys!
Jason Moser: Thank you! Robert Brokamp: Great to be here! Hill: Kicking off 2020 with
some money tips to help you out. If you're looking for even more in
written form, we've got you covered there, too. Go to fool.com/start. We've got a free report you can check out
that includes our five top stocks for 2020. But let's talk money tips.
Brokamp, let me start with you. Just out from Fidelity, great survey. Two-thirds of Americans have some
sort of money-related resolution for 2020. Because we care about health, nice to see
people with health resolutions, but we're particularly gratified to see the money resolutions.
Paying down debt, spending less, saving more. These are great in theory. Let's get to the actual tips here when it
comes to things like spending less. The idea of spending less is great,
how do people like actually put that into action? Brokamp: Well, the first thing to do
is to see where your spending is going. And this time of year is a great time of year
to do that because most credit card companies and banks offer some sort of
end-of-year summary of your spending. Just go to the website, you'll see it there.
Often you can download it in a spreadsheet. Also, if you use a service like Mint or Personal
Capital or YNAB, YNAB standing for You Need A Budget, they'll also provide
some year-end summary. It's a great way to look and
see where your money is going. And then, as you go through the expenses,
look for the things that have the lowest value to cost benefit. You're going to probably look at some of this
stuff and basically wince when you realize how much you spent on dining out, how much
you spent on your gym membership, and you only went to the gym 10 times. So you're going to come across stuff that
you think, "OK, this is something I can cut out for the coming year." Moser: Yeah. I think that the word
you just used there is perfect, wince. You will go through and find things you're
like, "What in the world was I thinking?" And that leads me to one of my favorite things
to do when you're looking to figure out ways to save money and to curb spending, particularly
in this day and age, where it seems like everything we have is built around a subscription at
this point. Go through a subscription audit. I mean, the beginning of the
year is a great time to do it. You're kind of hitting that reset button. Go through your credit cards,
your debit card, your bank accounts. See what subscriptions you have,
what memberships you have. Maybe it is a gym membership, Maybe it's only
$10 a month and maybe you justify that by saying, "Well, if I go six times, that's great." But I mean, at the end of the day, that's
$120 a year that, if you're not using the gym, maybe that's money that
can be put to work elsewhere. I do think a subscription audit
is a great way to curb some spending. And the nice thing is, you find those subscriptions
you're not using, you can quantify it, and then you can make a plan to
actually do something with that money. Say, "Listen, now, it's not just money that
I'm not spending anymore, but this is money that I'm going to save." And make the effort to have that money automatically
transferred into your savings account once a month or something like that. Those are the little things that can really
start to add up over the course of a year. Hill: When we talk about debt -- and, again,
we love to see people resolving to get rid of debt, because I think particularly for
younger people, you're right out of college, maybe you get that first job. I know it was the case when I was right out
of college, I was spending more than I should have, racked up some credit card debt. I think I probably took the first credit card
that was offered to me and didn't even look at what the interest I was being charged was. But it seems like auditing your credit cards,
particularly if you've got more than one, can be helpful, too.
Brokamp: Right, exactly. And the average credit card rate these days,
according to creditcards.com, is 17.3%, which in a low-interest rate world,
that they can still charge 17% -- Hill: That's crazy.
Brokamp: Yes. Students, by the way,
are paying average 22%. So there is no question that one of the best
things you can do to get out of debt or to manage your debt better
is to get a better card. There are lots of sites that offer recommendations
for the best card for your situation. We at The Motley Fool have one
called The Ascent. There are others. You can also just look at where you spend
most of your money and see if they offer a card where they'll give you like
5% back on those purchases. That's a great way to do it. If your goal is to pay off your debt this
year, you have to do more than the minimum. Let's say you have $6,000
in credit card debt at that 17.3%. $6,000, by the way, is about the
average balance for those who carry a balance. If you just pay the minimum, which is about
$240, it's going to take you almost three years to pay it off, and you're
going to pay $1,500 dollars in interest. If instead you want to get it done this year,
12 months, if you move that payment up to about $540, you'll get it done within
the year, you'll feel better, but you're also going to save yourself about $1,000 in
interest charges. So, that's a great motivation. Moser: Another thing you can do, and this
is something that we did towards the end of the year when we were undertaking a home
renovation project, particularly for homeowners, a lot of people I don't think take advantage
of the fact that they have equity in their home. You could perhaps open up a home equity line
of credit, which is almost always going to be a significantly lower rate than what you'd
be paying on one of these credit cards. So, it is paying off debt with debt, I do
understand that, but really, you're trading that high-interest debt
for some lower-interest debt. And oftentimes, there's a little bit of a
tax benefit because it is something tied to your home. And so, that's another thing to consider. Now, with a home equity line of credit, home
equity loans, things like that, they do come with closing costs and whatnot. I will say, in today's environment, you can
shop around and find a lot of lenders out there that will give this to you for free.
I mean, we opened up our home equity line of credit. Did not pay a penny to do it. And all you have to do is shop around,
find a couple of lenders, and insist. Say, "This is what I want. Give it
to me or I'm going to go find it somewhere else." I'm certain you can
find it somewhere else. Brokamp: Yeah. The tricky thing there, though, is just to make sure
that with credit card debt, there's no collateral. That's why the interest rate is higher. When you do the home equity line,
you're putting your house on the line. So, as long as you have
that plan to pay it off. Hill: Absolutely.
We're going to be taking your questions. Go ahead and fire those off.
We'll hit that in a few minutes. Jason mentioned, once you get out of debt,
once you start saving more, you can start putting that money to work for you. Certainly this year, I think we've got 401(k)
contribution limits going up, right? Brokamp: Right, absolutely. The contribution limit for a 401(k), 403b,
or TSP if you're a federal employee, it's now $19,500, with another $6,500 if you'll
be 50 or older December 31st of this year. So, the amount went up, which is great. Even if you can't afford to contribute that much, you
should at least be taking full advantage of the match. According to Vanguard,
about a third of people aren't doing that. So, you should at least do that. You really should be targeting about 15% of
your income, and that can be your contributions as well as the match. But if you're starting to save for retirement,
you should be targeting 15% if you want to be able to retire in your mid to late 60s.
Hill: Love to see the match when employers offer it. It's certainly something that we've seen more
of over the last 10, 20 years as we get into this low unemployment environment, where companies
are just looking to offer up more things to attract and retain employees.
And so, the 401(k) match is fantastic. Last thing before
we get to some ways to invest. Speaking of the low unemployment environment,
that actually seems to work out well for people who are currently employed.
Brokamp: Right. So, it's at 3.5%. Lowest rate in 50 years. It really does put employees in
the driver's seat in a lot of situations. If you have not gotten a significant raise
recently, maybe now's the time to ask for it or to even look for another job. The truth is, for most people, the biggest
bang they'll get is by moving to a different employer. There are a few places to go look. Glassdoor, Payscale, salary.com,
to see how people in your industry are being paid. If your industry has any sort of professional
association, they will also provide average salary information. So, look at those.
See if you're being fairly compensated. But as you pointed out in terms of the 401(k)
match, you don't want to look just at salary, you want to look at the whole compensation package.
Health benefits, match, your job flexibility. Especially if you're raising kids,
you might want a job that has a little lower pay, but you're more flexible,
you can work from home. But now is the time to look at that. Maybe you can increase the
income side of your balance sheet. Moser: I don't think you
can encourage that enough. I think a lot of people don't think about
the costs involved with bringing on a new employee. Hiring is really difficult because
you've got to nail it on so many fronts. You need to get the right person in there,
then you have to train that person. It costs money, it takes a lot of time. And if you mess one of those steps up,
a lot of times, that employee isn't going to work out, and you've wasted all
this time and all this money. So oftentimes, employers really
do want to keep those employees that they have. It's not about going up there and
threatening your employer, but it's going up there and having that discussion. And I think more often than not, in today's
day and age, I think a lot of employers are opening-minded,
willing to have that discussion. And perhaps it's not
all monetary, like you said. Job flexibility, something we pride ourselves
on here, as a parent, and we're all three parents, I think we can all agree, the job
flexibility here is wonderful, among all the other benefits we get. So, there are
just a lot of different ways to frame it. But, go have that
conversation. It's one worth having. Hill: And it goes back to something we were
talking about earlier when it comes to credit card companies, or companies
that are looking to loan money. It is a really competitive environment. And just like it costs money for companies
out there to hire people, credit card companies, the cost of getting a new customer is somewhere
in the neighborhood of $1,000. So, they're going to negotiate with
you if you are currently a cardholder. Moser: Yeah. Think about
all those online brokerages. A year ago, we were telling people, "Hey,
listen, at least speak with your brokers and tell them you've been an account holder for
X number of years, these commission costs are going down,
why don't you give me some free trades?" And look here, we're a year later now, we're
at zero commission costs for virtually everyone. So, I mean, that would have been
a conversation worth having back then. It doesn't really matter now
because everyone's dropped it to nothing. But, again, it just goes to show
you the power of having that conversation. It's often times at least worth a thought.
Brokamp: If I could add something to that, too. It's something that
people should consider doing. If you're saving more money, maybe you're
building up a savings account, an emergency fund, you're putting it in cash,
most people let it sit there earning nothing. These days, you can earn
1% to 2% if you look around. That's partially why these brokerages can
actually do commission-free trades, is because they don't pay you
anything on your cash. So, if you have any cash lying around,
try to get the best deal you can. Hill: Alright, before we get to your
questions, let's go with some investing ideas. Robert, real quick, for people who are just
starting out, you're a fan of index funds. Brokamp: Yeah, big fan of index funds. I prefer the total stock market index fund
as opposed to just the S&P 500 index fund, although both are good. The one thing I would say is that over the last
10 years, the S&P 500 has returned about 15.3% a year. International stocks, just 5.2%. I think international stocks are cheaper right
now, so I would recommend that people consider a little more
international exposure this year. Hill: In terms of individual stocks,
Jason, what do you got? Moser: Well, you know, me, Chris,
I'm not going to just stop at one. I've got to give you two, right?
I mean, I can never really make up my mind. But I do feel like, for investors out there,
young and old, new or experienced, a couple of companies that I think really
just have stood the test of time. No. 1, Home Depot. I think everybody's probably
familiar with this name at this point. But it's so much more than just a retail play. I mean, it plays into our housing market, which
is extremely important to our economy. It is retail. They've proven themselves
to be Amazon-resistant at this point. I mean, I'm going
to go ahead and say that. I don't think they're
still working on it. I think they are flat-out Amazon-resistant,
and a wonderful omnichannel retailer, and the numbers all back that up. You have a consumer side of the business,
a professional side of the business. Whenever you have any of those contractors
going to do work on your home or other homes in the neighborhood, most of the time, they're
getting their stuff from Home Depot. They're renting tools from Home Depot.
Craig Menear, the CEO there since 2014. The stock has performed wonderfully.
Dividend yield of 2.5% today. That will continue to grow over time.
They continue to buy back shares. It's just been a great
investment for a long period of time. It's kind of flown under the radar here for
a lot of us at The Motley Fool. But that doesn't take away from the
fact that it's been a very good investment. And then the other one is Microsoft. We live in a world where a lot of people like
to talk about Apple and the iPhone and these AirPods, and all this great
stuff that Apple's coming out with. And I think that Microsoft, for all that they
missed in this mobile revolution, I think they really are picking up a lot of ground
here as we get into cloud computing and spatial computing and all of these things that augmented
and virtual reality will bring to our lives. Important partnerships that they're developing with
companies, from engineering to healthcare and beyond. A little bit of a smaller dividend yield. I think somewhere the neighborhood of 1.3%
today, but that will continue to grow. It's a cash machine.
They do buy back shares. And Satya Nadella, also CEO since 2014. I think for that 10-year stretch where Microsoft
was basically unproductive -- I'll just use that word, unproductive -- under Steve Ballmer's
watch, Satya Nadella has taken this thing in 180 degrees the other direction. Five years in, I don't see any reason why
this company shouldn't continue to grow over the coming five years and beyond.
So, two companies I like a lot. Hill: Microsoft, a $1.2 trillion company. Moser: It's a big one.
Hill: It was up nearly 60% in 2019. You still like it where it is today? Moser: I love it. It's a recommendation in
our augmented reality service. There are just a lot of different ways for
this company to win, and just a huge installed base out there, particularly in the workforce,
all around the world, using their products and services. Hill: Alright, let's get to the
questions that are coming in. If you could, give us a thumbs up
if you're enjoying the video. It helps other people find the video.
And, again, go to fool.com/start. Check out our free report that
includes our top five stocks for 2020. First question Robert, from Valence. "What are your thoughts on tapping into your
401(k) plan for a down payment on a home?" Brokamp: Generally speaking,
I'm not a big fan of that. You can borrow from your 401(k) the lesser
of $50,000 or half your vested balance. And generally, you have five years to pay
that back, although if you use it for home-related purposes, your employer
might give you 15 years. It's an option. I don't think it's the best option. Fidelity has done a study on people who have
accumulated over a million dollars in their 401(k)s, and one of the characteristics of
the 401(k) millionaires is they don't take out loans, and they don't take
premature distributions. It's better to leave it alone. That said, housing is partially a financial
decision, partially a psychological decision. I mean, it's really important in your life to have
a house, and that's the only way to get the money. It's worth considering to a degree because
you're paying the interest to yourself as opposed to a bank, and there's
no credit check or anything like that Moser: The job security is
probably something to consider there as well. I mean, I will admit, we did that
for a particular instance in our lives. It was something where my
wife works for the federal government. We felt a bit more comfortable thinking that
she would have her job as we were going back paying that loan back.
But, yeah, I tend to agree with you. It's an option, but it's not my favorite. Brokamp: The point you're making there,
I think, is that if you leave your job, you then have a limited amount
of time to pay that loan back. And if you don't pay it back, it's considered
a distribution, with all the taxes and penalties. Hill: Anur asks, "I've been investing since
2015, and I've been a member of Stock Advisor for the past three years. I'm planning to create a second
portfolio just with dividend aristocrat stocks. Or, should I keep my focus on growth stocks?"
Two very different types of investments there. Dividend aristocrats, for those unfamiliar,
companies that have paid a dividend and increased that dividend for at least 25 years straight. Moser: Yeah.
And I mean, congratulations Anur. Thank you for being
a Stock Advisor member. I mean, I don't think you should
go just growth or just dividends. I mean, I think you want to have all of it. And I think there's no reason to not open up a separate
portfolio that's focused on dividend aristocrats. I think that you just want to make sure that
when you do that, you put that in a portfolio that's going to be protected
from taxing you on all those dividends. So I think typically, the IRA
is probably the preferred method. So if you're going to have dividend payers
that you're going to hang on to indefinitely, put them in an account where they won't necessarily
be subjected to the taxes on the dividends. But what we see over time -- and this is really,
over the course of 10, 15, 20 years -- you start to see the magic of
compounding take effect there. Dividend aristocrats,
they pride themselves on that status. Once they get it, they typically don't stop
unless something crazy happens. Brokamp: Right, because with those dividends,
you're buying more shares, which pay a growing dividend, which allows
you to buy even more shares. It's that accumulation of shares, and that
growing dividend payment -- dividends historically grow at a rate of 1% to 2% above inflation. You
compound that 10, 15, 20 years, and it's pretty powerful. Moser: I mean, you can get your cost basis
down to zero. I mean, not theoretically. You can actually get your cost basis down
to zero if you hang on to them long enough. So, I mean, to me,
that's a very attractive prospect. Hill: Question from Greg, who asks,
"What are the big-picture expenses that are the most detrimental to
saving for retirement?" Great question, because we hear all the time
about, "Hey, stop buying lattes every day." But the big-picture
expenses can hurt you, too. Brokamp: Right. When you
look at the average Americans budget, the top
three expenses are housing, No. 1; then transportation; then food. So, if there is a way for you to reduce any
of those three, you're going to knock off a lot of expenses. When you look at surveys of financial regrets,
what people most often regret is food-related stuff. Dining out too much, buying lunch every day
at work, yes, the coffee, all kinds of things like that. The food stuff is obviously
the easiest one to get rid of. I mean, if you're already in a car with a high payment,
you can get out of that, but it's difficult. If you're already in a house that has a big
payment, it's harder to get out of that. But certainly, the next time you make decisions
about those -- your housing or your transportation -- keep those costs as low as possible. Moser: What if you learn
how to do a couple of home repairs, Bro? I mean, that can save you
a little money here and there, right? I mean, we had a big
project on our front porch. I undertook that one myself
and saved us about $4,000 in the process. YouTube can teach you a lot out there, and
Home Depot has a great YouTube channel, too. Check that out. Hill: Question from Antoine, who asks,
"Do you have any thoughts on whether it's better to invest in real estate with
physical assets or by buying REITs?" REITs, for those unfamiliar, real estate
investment trusts. Any thoughts? Moser: Yeah, I talk to Matt Frankel, my co-host
on Industry Focus every week, and we talk about REITS and real estate a lot because
he works with Millionacres. He loves REITs. I tend to agree because if you're investing
in physical real estate, you're typically limited to, oftentimes,
that physical piece of real estate. And that can be great, or maybe make a bad
decision and it doesn't work out so well. I think the nice part about REITs is that
they tend to give you a lot of diversification right off the bat. Even if it's something like a healthcare-focused
REIT, or a warehouse-focused REIT, you're getting a big collective
of properties versus just one. And so, I do appreciate that. They tend to yield some really some dividends
because of the nature of the business model. So I would probably
opt for REIT over physical. But, hey, if you can work both into your
portfolio, that's not a bad situation, either. Brokamp: Yeah, REITs are just
so easy to take advantage of. You just buy it just
like any other stock. If you go back to 1972, which is when the
historical returns of REITs begin, they've actually outperformed the S&P 500 because
of that higher dividend, and they're also not highly correlated to the overall
stock market. So, there's good diversification. If you want to do physical real estate,
I think that's possible, especially if you're a handy person and you can do the repairs yourself,
but it's certainly higher on the hassle factor. Moser: I think on REITs, too, one more thing,
and we've talked about this over the past five years, thinking at some point, as interest
rates start to creep back up, that high yield in REITs and master limited partnerships and
whatnot maybe it starts to not look as attractive. Rates haven't gone up. [laughs] So, I don't know that that's anything
that is really going to matter in the near term. And so ultimately, what I think that means,
it gives these REITs maybe a little bit more room to run, making them
still attractive options for investors today. Hill: Question from Worldwide Wes. "My employer now offers
a tax-deductible 401(k) and a Roth. Is my max contribution of
$19,500 combined for both for the year?" Brokamp: The total you put into the 401(k)
has to be $19,500 if you're not yet 50. You can split that up between the Roth and
the traditional, but you can't put $19,500 in one and $19,500 in another.
It has to be combined 19,500 in how you split it up. I think doing a little bit of both,
by the way, makes sense. That's what I personally do, because tax rates are
so low right now that I want a little bit of Roth money. I don't get a tax deduction today, but because
rates are low, I'm not giving up quite as much. I'm assuming rates are going to be higher in the future,
I'm going to be happy with those Roth assets. We'll see. Moser: Yeah, I do have
a Roth and a traditional as well. I like that. Hill: Question from Jeff, who asks, and this
is for you, Jason, "Is the payments basket still looking good in 2020?" Jason created his own mini-ETF, the war on
cash basket, with four stocks -- Visa, MasterCard, PayPal, and Square.
How's that looking in 2020? Moser: Yeah, to me, I mean,
I think this is the beauty of it. It is a very long-term play, right? I mean, this basket was built on not
a short-term catalyst but a long-term trend. And so I think that globally speaking, we've only
just begun to move more towards a cashless society. And understand, I'm not
saying totally cashless, so don't at me. But people appreciate the fact that they don't
necessarily have to use cash all the time. So, I think this is a long-term trend that's
going to play out for several years to come, and those four holdings, I think,
all are still poised to do great things. Hill: Question for Bro. Stacey asks, "Are there any good budgeting
sites or resources that you recommend to help build a plan for the year?" Love the question, love the
fact that Stacey is planning for 2020. Brokamp: Yeah, so, I mentioned
a few services already. Mint, Personal Capital, YNAB.
Those are the three most popular. I personally love just a regular old
spreadsheet because you can customize it. And if you're married, I love having something
that's in the cloud through Google Sheets. That way, you and your spouse can consult
it at any time and see how things are going. You can google budget templates for a spreadsheet,
and you'll get all kinds of ones that have already been created, people have used them, and you
just download them and then customize it a little bit. Hill: Speaking of spouses, John asks, "How
do you suggest addressing spending habit changes with your spouse? Any tips or lessons you guys
have learned with how to do it best?" Brokamp: Compromise.
[laughs] Like marriage in general. Moser: Yeah, I'm trying to figure out how
to not get myself into trouble here. Yeah, it's compromise.
I think that is it. Have the conversation,
but don't go into the conversation with the mindset of, "She or he is wrong,
and I am right, and listen to me, I'm going to tell you how this is." It is about meeting in the middle some way,
if you want to stay married, I think, at least. Brokamp: Yeah. I think it's a good idea also to have
a little bit of money you can do whatever you want with. In fact, that's another tool. There's an app my wife and
I used to use, The Best Budget app. We each had, I think it was
$300 a month that we could spend -- Hill: Wait, the name of the
app is the Best Budget app? Brokamp: Best Budget app.
Hill: That’s good branding. Brokamp: And you'd just put in there,
"OK, I went and did this thing. I spent this much," and you
track how much you spent. If you're really having trouble,
there's actually something called a financial therapist. You can go to the website of
the Financial Therapy Association. They are expert in helping couples navigate
these issues, because you do have to somehow agree on some sort of plan, because if you
don't, you won't have a plan, and you may not accomplish the financial
goals that you want to. Hill: Yeah. I've done this as well, just the whole,
"Alright, most of our money," because my wife and I both work outside the home, "most of our money
is going to go to these joint expenses. But we've each got our own
money to do with what we want." Moser: Yeah, I think that's great.
We do the same thing. Hill: Karen asks, "Can I, or maybe should I,
open a Roth IRA, if I am already in retirement?" Brokamp: Well, you need
income to be able to contribute to an IRA. You might be retired, but also still working
10 hours a week doing some sort of job of some kind. As long as you have earned income,
I think it's a great idea. The great thing about the Roth IRA is that
there are no required minimum distributions at age 70.5, although actually, thanks to
the New Secure Act, the required distribution age went up to 72 for 2020 an onward.
2019 and past, you still had 70.5. So, it's a great estate planning tool, too,
because you can just let it grow and grow and grow and let your kids or heirs or your
favorite YouTube Live people inherit that money. And they inherit it tax-free because it goes
tax-free to the heirs as well, as long as it's under the estate tax limit. Moser: Would Social Security
be considered earned income in that case? You're retired, you get
a Social Security check. Brokamp: No.
It has to be a paycheck. Social Security doesn't count,
dividends don't count, capital gains don't count. It has to be, you went in and did a job. Hill: William asks, "What online brokerages
do you suggest for someone who will not do a lot of selling and will probably
hold most stocks for five years or more?" At this point, to your point earlier about
trading commissions going to zero, pretty much any of them.
Moser: I mean, any of them. I was with Scottrade forever.
Scottrade was acquired by TD Ameritrade. So now we're with TD Ameritrade.
I like TD Ameritrade. I like the interface, the resources, the tools.
It doesn't cost me anything to maintain that relationship. I invest very much like
that listener right there. I mean, I don't sell a whole
heck of a lot. It's mostly buying. But I do feel comfortable knowing that my
money is with a reputable firm that likely isn't going to just
pack up in the middle of the night. But yeah, to your point, I think there's a
lot of choices out there now that it basically isn't going to cost you anything anyway. Brokamp: Yeah. This probably won't apply to the person who
asked the question, but if you are doing something more sophisticated like options or something
like that, there are some brokers that are better at that than others,
with lower commissions. Also, if there are certain mutual funds that
you really love, you want to find a broker that offers them without any transaction fees, because
transaction fee funds can be high, upwards of $75. So, for example, if you love Vanguard's actively
managed funds -- and they have some good ones -- it's probably better to go
directly to Vanguard to get those. Hill: David asks, "Bro, I'd like
to pay off my house by selling stocks. Is that a good idea or too much of a tax hit?"
Brokamp: Well, that's a tough one. So, paying off your mortgage, for me personally,
my goal is to pay it off before I retire. Just because I like that idea of true
financial freedom, not owing anyone anything. That said, when interest rates on a mortgage
these days are about 3.5% or so, from a numbers perspective, selling stock to pay off a low
interest rate loan that might be tax deductible, although it's harder these days, it's tough
to justify that, especially if you're taking a big tax hit. So I would say, from a pure numbers perspective,
it probably is not something that I would necessarily recommend.
But, the market's doing very well. If you want to take some off the table and
you also, like me, feel better about eliminating that mortgage, I'm not
going to say don't do it. Moser: Yeah. I ask
myself that same question often. And I think one of the things I come back
to is, I figure at some point, when we do retire, our kids in theory should be out of
the house and off doing their own thing. Hill: Fingers crossed.
Moser: Fingers crossed. But we'll likely sell our home
and downgrade to a smaller home. So, does paying off that mortgage
today really matter in that context? And to your point about
interest rates being so low, probably not. I mean, it's almost free money today. So, yeah.
Everybody's situation is different. There is no yes or no answer,
I think, with that one. It's always a tough one. Brokamp: Yeah. Again, anything related to housing
is often more psychological than financial. Hill: Two quick questions before we wrap up.
First, from Cole, who asks, "I'm 18. I'm just getting started. What is the best way to start learning about
how companies work and how to value them?" First, kudos to Cole,
getting started investing at the age of 18. Moser: Absolutely. Congratulations on that.
I would say, No. 1, I'm a Twitter guy. Fintwit, as they call it, is a vast resource. I mean,
you can find a lot of great follows out there. It's free. And not to toot our own horn here, but man,
listen to MarketFoolery, because that's a lot of what we do on our daily
podcast Monday through Thursday. MarketFoolery is all about talking about the
business and financial news of the day in context of the companies that we follow.
Oftentimes, we talk about valuation stuff. We do dig into that stuff
with Industry Focus as well. But we do have a family of podcasts. They're all free and they dig into
that kind of information all the time. Check them out, at least, and see
if that doesn't scratch that itch for you. Hill: Last question. Bea asks, "As a new investor,
I'm hearing a ton about diversification. How do you diversify if you
don't have a lot of money to work with?" Great question.
Brokamp: It is. I would say what's most important at this
point is, just get money in the market. If you're just starting out, the No. 1 most
important determinant of how much money you'll have is just how much you get into the market,
rather than what specifically you buy. I mean, for some rough rules of thumb, we
generally say you shouldn't have more than 10% to 15% in a single company.
And you should definitely diversify across sectors. You don't want all your stocks to be tech
stocks or all your stocks to be basic materials or something like that. But generally speaking, if you're just starting
out, I would worry more about how can I save money and get more into my account? Hill: But with an index fund or ETF,
you can get diversification pretty easily. Brokamp: Yes. Many, many people here at The Motley Fool
as well as our readers and listeners have an index plus a few. They have the majority of their money in index
funds, and they own some individual stocks. Moser: Yeah. We all start out with
that challenge, lack of diversification. It's not something that just
happens overnight, but you kind of build into that. But I think a great way to get diversified
immediately, S&P index fund or something like that. You're immediately an owner of 500 of the
most important businesses out there. And I think that makes investing in individual
stocks going forward a lot easier, because you've gotten a little bit of that pressure
off of you with that diversification in that fund. Hill: Alright, Jason Moser,
Robert Brokamp, thanks for being here, guys! Thanks again for watching!
Again, go to fool.com/start. You can check out our free report with the
top five stocks for 2020. I'm Chris Hill. Thanks again for watching!
We'll see you next time.
