CLOSED END FUNDS (CEFs)

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you make informed investing decisions.  Consult a Broker or Lawyer before making any investment. 

I want to discuss a type of investment that many are unfamiliar with in the investing industry.  These are called CEFs or Closed-End Funds.    Closed end funds are mutual funds that have a set amount of shares.  The amount is set at the funds IPO and can only be changed by a management decision.  Normal mutual funds can sell more shares, but not CEFs.  

Closed-end Funds are basically like a mutual fund but they can not sell additional shares. Since these funds are fixed, they sell initially at Net Asset Value. (NAV)  So in the market, these sell for more or less of their value.   If the price is more than NAV, they are selling at a Premium. (like +2.1%)   Since these are managed, when selling at a Premium it may be due to the excellent management.   You have to pay for quality funds.   A quality fund that normally is above premium of NAV is PIMCO Dynamic Income fund (PCI).   I own shares of this CEF.

Where the most money can be made is when they are selling at a discount to NAV.  I purchased one today which is a healthcare REIT that is selling at -8.45 to NAV with an annualized return of 6.71%.  The one mentioned is THQ – Tekla Healthcare Opportunities Fund.   Prices fluctuate all the time, so sometimes some really good prices are there for the taking. It should be noted that CEFs many times do not perform well in periods of fluctuating interest rates like we experienced in 2022.
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Here is a complete rundown from the Fidelity website that does a good job in explaining CEFs.

What is a Closed-end fund?

A closed-end fund holds an IPO at launch and the money raised from that IPO is used by portfolio managers to buy securities.

Even though they have been traded in the US for over a century, closed-end funds (CEFs) are not well understood.  A common misunderstanding is that a CEF is a type of traditional mutual fund or an exchange-traded fund (ETF). A closed-end fund is not a traditional mutual fund that is closed to new investors.
 
At its most fundamental level, a CEF is an investment structure (not an asset class), organized under the regulations of the Investment Company Act of 1940. A CEF is a type of investment company whose shares are traded on the open market, like a stock or an ETF.
 
Why are they called "closed-end" funds?

Like a traditional mutual fund, a CEF invests in a portfolio of securities and is managed, typically, by an investment management firm. But unlike mutual funds, CEFs are closed in the sense that capital does not regularly flow into them when investors buy shares, and it does not flow out when investors sell shares.  After the initial public offering (IPO), shares are not traded directly with the sponsoring fund family, as is the case with open-end mutual funds. 

Instead, shares are traded on an exchange, typically, and other market participants act as the corresponding buyers or sellers.  The fund itself does not issue or redeem shares daily. Like stocks, CEFs hold an initial public offering at their launch. With the capital raised during this IPO, the portfolio managers then buy securities befitting the fund's investment strategy.
 
After the IPO, there are only 5 ways to increase capital within the portfolio
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1. Making sound investment choices that appreciate and thus increase the net asset value
2. Issuing debt, thereby leveraging the fund
3. Issuing preferred shares, thereby leveraging the fund
4. Conducting a secondary share offering (selling new shares to the public)
5. Conducting a rights offering (giving existing shareholders the right to invest more capital into the fund in proportion to their existing ownership),                                     

Similarly, there are only 5 ways capital can flow out of a CEF

• Distributions to shareholders
• Poor investment decisions
• A tender offer to repurchase shares, which is a method to control discounts
• For leveraged funds only, forced sales to remain in compliance of leverage limits
• The liquidation of the fund

 
So, because capital does not flow freely into and out of CEFs, they are referred to as "closed-end" funds.    The "closed-end" structure gives rise to discounts and premiums. After the IPO, a CEF's shares trade on the open market, typically on an exchange, and the market itself determines the share price.  The result is that the share price typically does not match the net asset value of the fund's underlying holdings. (Net asset value = (fund assets - fund liabilities)/shares outstanding)
 
If the share price is higher than the net asset value, shares are said to be trading at a "premium."  This is typically portrayed as a "positive discount," although mathematically that is counterintuitive. For instance, a fund trading at a 2% premium would be shown as "+2%."  If the share price is less than the net asset value, the shares are said to be trading at a "discount."  This is typically portrayed with a minus sign, "-2%."
 
The closed-end structure also has other implications

• Unlike with open-end mutual funds, a closed-end fund manager does not face reinvestment risk from daily share issuance.
• A closed-end fund manager does not have to hold excess cash to meet redemptions.
• Because there is no need to raise cash quickly to meet unexpected redemptions, the capital is considered to be more stable than in open-end funds. It is a stable capital base.

 
The relatively stable capital base, in turn, gives rise to 2 other attributes:
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First, it makes CEFs a good structure for investing in illiquid securities, such as emerging-markets stocks, municipal bonds, etc. The higher risk involved with investing in illiquid securities could translate into higher returns to shareholders.
 
Second, regulators allow the funds to issue debt and preferred shares, with strict limits on leverage. The fund can issue debt in an amount up to 50% of its net assets.  Another way to look at this is that for every $1 of debt, the fund must have $3 of assets (including the assets from the debt).  This is commonly referred to as a 33% leverage limit.
 
The fund can issue preferred shares in an amount up to 100% of its net assets. Another way to look at this is that for every $1 of preferred shares issued, the fund must have $2 of assets (including the assets from the preferred shares). This is commonly referred to as a 50% leverage limit.
 
The point is that CEFs are not highly leveraged, though any amount of leverage magnifies the volatility of the fund's net asset value.

Key takeaways:

• Closed-end funds are a type of investment company whose shares are traded in the open market like a stock or ETF
• Capital does not flow into or out of the funds when shareholders buy or sell shares
• Like stocks, shares are traded on the open market
• A CEF's share price is almost always different from its net asset value
• Investors need to be aware of the resulting premium or discount
• Because of the stable asset base, CEFs can invest in illiquid securities and can issue debt and/or preferred shares

 
Link to Fidelity Research on CEFs.

Here is an example of CEF Screener using a discount of -8 or less to NAV for one month and -7 for the year and up at least .5 for today.   This list is for example only, each investment has to be analyzed on all merits, not just the discount to NAV.

So in summary,  I believe that Closed-End Funds are great for income and some experience growth in value based on their underlying investments, particularly those tied to REITs.
They typically will move back to their NAV over time which means you can make some good money by buying them when they are at a discount to NAV.   Be sure to analyze the fund before purchasing.   No one thing such as a discount to NAV means it is a super investment.
 

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        Resolutions and Goals for 2023

There are a few things that allow us to accomplish things like having goals, perseverance, and faith in the Lord.    With God giving us directions and help, we really can set our minds to do some amazing things.    For the past two years, I have made some New Years’ Resolutions and want to discuss what they were, and how God helped us to accomplish them.

Zig Ziglar has said that it would be rather silly to send a basketball team onto the court and ask them to score a goal if there were no goals or backboards set up to shoot at.   So having a goal is important.   One of the books I read this past year said that only 3% of people set goals, but those 3% many times accomplish more than any 10 of those not making goals.

The term Resolutions is not in the bible.   But there are several verses and stories regarding the making of plans and setting up goals.

Luk 14:28  For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? 
Luk 14:29  Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, 
Luk 14:30  Saying, This man began to build, and was not able to finish. 

So planning within God’s will for our lives is not a negative, but a good thing.

To not make this too long, let’s review my goals and resolutions at the end of 2021 for this past year of 2022.    I made 7 which is the most I ever tried to accomplish in one year. 
 
The first five were related to my service to God, and the last two were about personal goals.
 
       Resolutions for 2022

1.  Live so close to God that nothing will offend me.

Psalms 119:165 (KJV)  Great peace have they which  love thy law: and nothing shall offend them.

2. Stay focused.    One thing at a time.                                                                                                     

3. Trust God no matter what happens.  

4.  Be Bold in sharing the Gospel of Jesus Christ.   Try to witness every opportunity God gives me to family, friends, and new acquaintances.  

Rom 1:16  For I am not ashamed of the gospel of Christ: for it is the power of God unto salvation to every one that believeth; to the Jew first, and also to the Greek.

5.  Remember how short the time is we have here on earth.  

Psa_90:12  So teach us to number our days, that we may apply our hearts unto wisdom.
Pro_27:1  Boast not thyself of to morrow; for thou knowest not what a day may bring forth.
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6.  Attempt to pay off our Home Loan.

7. Study to make investments more profitable.  

If you remember that in 2021, I had some of these same goals, and all worked out well.  God helped and guided me throughout the year and we even met our one personal goal to be debt free of all loans except our home.   On Sept. 7, 2021, we made our last payment on all those liabilities.   It was shouting time for us. 

But before I got too excited and lead you to believe all was was a bed of roses once that was done, four days after reaching that goal, we found that we had foundation issues on the east side of the house which required some expensive foundation work.  However, for a few days, we were debt free except for the house.   Our financial condition was the best of our lives,  and the foundation issue certainly did not offend me.   I was disappointed, but not offended.   I just trusted God.

Focusing on God and trying to consistently read my bible, really helped me focus on important things.   I quit watching the news and tried to turn every care over to the Lord.   While I might not have been 100% effective, very few things offended me this past year.    And there were tons of things that came up through the year that could have thrown us off course.    When your focus is on God things are much easier to deal with as He carries the load.

When you are a Christian, you know that you will face persecution.  I don’t have time to tell you of the many issues that came up in my family’s lives and at work, but there were many. There will always be a battle to fight.   But our trust was in the Lord and the year went well.
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Of my resolutions, I think the one I failed most on was witnessing more to the lost.  I may have been a bit bolder, but this area I need to work on in 2023.

I watched several of our church members die and leave this old world in 2022.   Also several of my other relatives died, and my focus on numbering my days was made even more real.   I try to realize that this may very well be my last day and I best make the best of every moment.

In August, we made our last payment on our home and I found that the grass is truly a bit greener and more of a blessing to you when you know that the home is all yours.   The Bible teaches that the borrower is a servant unto the lender, and to live debt free is a noble thing to shoot for.

In studying investments, I met a fellow in April while reading one of his free kindle books named Joshua King.   He is a 39-year-old Marine and he began writing kindle books 2 years ago.  He now is the leading seller of Kindle books on Amazon with over 200 books, and I have read several of his books and we have become friends. 

I decided to try and spend more time reading and studying as he suggested, and this week finished up my 90th book in the year 2022.   Sounds impossible since I had never read 12 books in a year before.   All that it took was spending one hour a night to read versus watching 2 hours of tv.   It has been such a learning experience.   All the books I read focused on investing, habits, and having the right mindset.    And my first reading every day and my last reading is the bible.

By focusing our investments on the newer methods I learned (mainly from Joshua King), we were able to end the year having missed by $249 doubling our investment dollars in our Roth IRAs.    And if you ever had a year where that sounded impossible, it was 2022.    I won’t elaborate on it, but I know God has been with me and guided me in the decisions we made.   A lot of the investment advice I read was not true, but the Holy Spirit gave me insights into what was truth and what was lies.  Same in other books.  If they were total myths, I quit reading many and went to the next book.

So for this new year, I am going to do those first 5 resolutions again and really focus on #1 and #4.
 
 2023 RESOLUTIONS
 
1.  Live so close to God that nothing will offend me.

Psalms 119:165 (KJV)  Great peace have they which love thy law: and nothing shall offend them.
 
2. Stay focused.    One thing at a time.
 
3. Trust God no matter what happens. 

4. Be Bold in sharing the Gospel of Jesus Christ.   Try to witness every opportunity God gives me to family, friends, and new acquaintances. 

Rom_1:16  For I am not ashamed of the gospel of Christ: for it is the power of God unto salvation to every one that believeth; to the Jew first, and also to the Greek. 
 
5.   Remember how short the time is we have here on earth.

Psa_90:12  So teach us to number our days, that we may apply our hearts unto wisdom.
 
Pro_27:1  Boast not thyself of to morrow; for thou knowest not what a day may bring forth.
 
So in conclusion, my results show that setting goals and having resolutions can be a good thing if you use discipline.     I think God wants us to be people of purpose and planning.   While this is all good to be able to reflect upon, it is crucial that we see it accurately.

I pray that we will never look at our earthly possessions as our checkpoints to having success, as that is so minor in comparison to having a great family, a great church, and most of all a good relationship with God.   What is so wonderful about serving God is that he will provide for us with or without any possessions.   If everything here on earth we accomplished is gone tomorrow, God is still there.   My #3 resolution is to ALWAYS TRUST GOD.   Our main focus in life should always be to look to serving the Lord and letting the Holy Spirit guide us daily.
 
Mat 6:19  Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: 
Mat 6:20  But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: 
Mat 6:21  For where your treasure is, there will your heart be also. 
 
 
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I Will Teach You To Be Rich – Ramit Sethi

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 
 
I Will Teach You to Be Rich by Ramit Sethi is a wonderful financial guideline book.  Perhaps of all the 83 books I have read on finances this year, this is probably the best.  The reason I say this is that it is not complicated.   It gets down to simple advice about what it takes to handle 85% of your finances in just six weeks.  If you never do the last 15% and you follow his guidelines in these first 6 weeks, I believe your odds will be great that you will retire with a huge balance in your retirement account if you are starting in your 20s or 30s.


All of what I said above is true.   But after reading Zig Ziglar's book "Master Successful Personal Habits", I have decided I must withdraw my recommendation on this book.  While the advice is good on investments, some of the language used contradicts some of my Core Values.   In "Winners Never Cheat", Jon Huntsman says none of us should ever do things that conflict with our core values.   As a Christian, I know that I should not have ever recommended this book due to some of the language.

In Zig Ziglar's book which I will review later, he encourages us to speak positive words to ourselves.  He says we should start each day stating the following.

I am a compassionate, respectful, encourager who is a considerate, generous, gentle, patient, caring, sensitive,  personable, attentive, fun-loving person.  I am a supporting, giving and forgiving, clean, kind, unselfish, affectionate, loving, family-oriented human being, and I am a sincere and open-minded, good listener, and good-finder who is trustworthy.  These are the qualities which enable me to build good relationships with my associates, neighbors,  mate, and family.

I'm a person of integrity with the faith and wisdom to know what I should do and the courage and convictions to follow through.

I have a vision to manage myself and to lead others.  I'm authoritative, confident, and humbly grateful for the opportunity life offers me.  I am fair, flexible, resourceful,  creative, knowledgeable, decisive, and an extra-miler with a service attitude who communicates well with others. I am a consistent, pragmatic teacher with character and finely-tuned sense of humor.

​I am an honorable person and am balanced in my personal, family, and business life, and have a passion for being, doing and learning more today so I can be and do more tomorrow.

These are the qualities of the winner I was born to be.  Tonight I'm going to sleep wonderfully well.  I will dream powerful and positive dreams.  Tomorrow I will awaken refreshed, and it's going to be an absolutely magnificent day.


I started trying this out, and I did great on this until I got to that line about integrity.  How can you be a man of integrity and do something that conflicts with your core values.  You can not.

Joyce Brothers say you can not consistently perform in a manner which is inconsistent with the way you see yourself.  If you do, your conscience will be pricked and you will say "That is not me." 

Well my conscience was pricked, and I am withdrawing my recommendation on this book as of 1/21/2023.  While great in content about managing money, it does not meet the requirements my core values demand.   If I recommend a book, I want it to be one my grandchildren could read.    Sorry for any confusion on this.

I will try very hard to never do a book review on any book that ever conflicts with my core values again.




 
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Myths in Stock Market Advice – Part 2

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you make informed investing decisions.  Consult a Broker or Lawyer before making any investment. 

Those of you who have been following my blog and articles for several months, know my reason for doing this is to share some of my findings in investing in the stock market.   I want to help everyone to make good solid decisions when it comes to investing.  My first 40 articles have been tied to things that have worked for me or promising new things I am trying this year.   The reality of the situation is that I can only share what I know to be the truth.  
 
I wrote my first article on myths last week.   I want to continue on that first topic today and again document some of my findings from the 3 books I mentioned in that first article.   I may write several articles on Myths as I keep finding more and more fallacies in stock market advice.   A lot of unscrupulous people are taking advantage of the uneducated.

To read article one on myths, click below:   
https://lifecanbesimple.net/blog/myths-in-stock-market-advice
 

MYTHS IN STOCK MARKET ADVICE

Last week we started with the fallacy of believing in an average 12% annual return in the stock market, and I want to elaborate on this topic a bit more this week.   A lot of people teach that the stock market will average out to a 12% annual return so don’t have to worry about where you invest, just invest it consistently, and it will work out.

WRONG!!!

This is so prevalent a teaching that even I have been guilty of using this to encourage people to “Just Invest” no matter the market.   I can’t overemphasize the importance of knowing the market and knowing WHAT to buy and what to avoid.

​In the book “Stop Investing Like They Tell You” by Stephen Spicer, a CFP (Certified Financial Planner),  he points out the fallacy of believing the S&P 500 will always average a 12% annual return.   Note: On this next image, you can read this better in a browser than on your phone.

So if you lose ½ of your money, now to break even, you must have a 100% return.   How many of you ever made a 100% return in your IRA or 401K?   I have been investing for 30 years, and I think my best year ever was 22%.
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So our number one goal should be to never lose money.  Not easy when you are trying for above-average gains, but there are logical ways to proceed cautiously.

My new goal is to limit all stocks and ETFs to an 8% loss by using stop-loss orders.   After we hit a bottom in the market, I buy back in, sometimes on the same stock or ETF.   But I try to not ride out a 25 to 40% down market.   It is extremely hard to ever overcome.   And there will be some upcoming myth articles about when the market did much worse than lose 40% in one day (more than once).

Using this stop loss orders method for the last 4 months, my wife and I now have an overall gain of around 3% on all five of our Roth IRAs for the year.  That is so much better than the current 26% loss in the S&P 500.   While my new Dividend Growth Stock approach is unproven, the majority of those stocks are in my Schwab account which is up 8.6% for the year.   At Vanguard where we are primarily in full stock market indexes and real estate (REITs) and ETFs on Dividend Growth Stocks, we are up 6.8%. 

Our two Wealthfront IRAs are managed by Wealthfront, and both are about 1% up for the year.  These are heavily conservative with balanced investments in all markets and some foreign bonds and foreign stocks.

So as far as the advice to never bother or consider the markets,  I think we know that is bad advice.   I am not advocating not putting money into investments in down markets, but I am advocating placing new money to Savings accounts, Bonds, CDs, Tips, and I-bonds until the market downturns bottom out.

Capital One 360 Savings have high-velocity savings paying 3% per month and Discover Savings is also paying 3%.  I saw today that Credit Karma has a savings account paying 3.3%, but have not researched it.   I purchased a six-year CD in my Fidelity Roth IRA this week which is paying 5.05% and 4 year one paying 4.8% that is not callable.  Conservative options abound during this bear market as we face the possible 2023 recession.
 
A Few More Myths:

The United States has the highest tax rates in the world.   Not true!

Mutual fund myth:   Don’t worry about low one or two-percent fees on Mutual Funds.   False again.  Just a one percent fee can reduce your long-term return up to 28%.   A two percent fee can lower your long-term return by as much as 63%.   Fees matter.

Another hot tip myth: 

When things take off on whatever is hot now, jump in without regard to verifying the value of the investment.  Extremely stupid advice.   History is full of “The Greater Fool” stories where euphoria takes hold and cost does not seem to matter to investors.   Cost and value ALWAYS matter.   I think Amazon’s P/E ratio is far from 8 to 1 as is desired.    I think I read it is more like 1400 to 1.   Does that make it a bad investment?    Sounds risky to me, but many people got rich buying Amazon when it started.   But now is not then.

Warren Buffet warns to “Be Fearful when others are greedy, and greedy when others are fearful.”

The key to this advice is to buy when prices are down and the market is stabilized.    Then when the market is high, consider selling when the stock or ETF has exceeded a fair value.   I personally try to minimize buying and selling, but huge gains sometimes are a good time to at least recover your initial investment.   High prices typically do not last forever.

Myth:  Financial independence and the ability to retire early (FIRE) is easy to obtain.

Financial Independence means you are earning enough that your investments are making more than your annual costs in perpetuity.

The reality is this is very hard to accomplish.   You can not expect an average of 12% per year, and you may not average 8% per year.  If you need $50,000 of income yearly, you must accumulate $700,000 (or more) to sustain your retirement expenses based on an 8% return which is never for sure.

So take these findings and learn to make better decisions.  Keep reading and studying on your own.   I will do another Myths article in the upcoming month.  If you are a serious investor, be sure to read the 3 books I mentioned in the first article which is below. 
 
https://lifecanbesimple.net/blog/myths-in-stock-market-advice

 
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Christmas is A Time of Family and Joy

Christmas is one of my favorite times of the year.  It is great to come together with family and rejoice in all the blessings God has given each of us through the year.   When we get together as a family as God planned the family, it is a true time of joy.

Sadly, many spend much of the Christmas season wrapped up in buying and giving gifts.   While that is sometimes enjoyable, Christmas is so much more than just buying, giving, and receiving.   I believe minimalists are people who can look past all the glitz and marketing of goods, and see the true meaning of Christmas.

It certainly does not take a lot of big spending to have a joyful Christmas.    When you seek out the season’s true meaning, you have to conclude that the gifts are not really what it is all about.

Don’t get me wrong.   I think giving gifts is fine, and little children should receive most of the gifts. In our family, we try to spend 80% of our allotted Christmas budget on the children.  When you are young, these are your children.   As the years go by, they become grandchildren, and at my advanced age, we now even have 3 great-grandchildren.   What a joy to see their eyes shine and twinkle when they get to open their gifts.

One of our granddaughters did a little presentation at her music school’s recital last year.   Our little 6-year-old Mary did a super rendition of a fun Christmas song “Santa Claus is coming to town”.  I still watch that video on my phone every few months.   Last night she and her older sister Rachel both performed wonderful renditions of new songs.   What a blessing to all who got to attend and hear them sing.

So doing things and sharing time at Christmas with people is great.  We also try to go down and watch the huge exhibit of electric trains and also take a tram ride at our Fantasy of Lights at Midwestern State University. Just watching the kid's eyes light up with the viewing of Christmas lights is super.

The joy that truly comes from Christmas is about the true reason for the season.  Christmas is truly not about the gifts we give one another, but it is about the greatest gift ever given to mankind. 

That gift of course is Jesus Christ, the only begotten Son of God.  

Eph 2:5  Even when we were dead in sins, hath quickened us together with Christ, (by grace ye are saved;) 
Eph 2:6  And hath raised us together, and made us sit together in heavenly places in Christ Jesus: 
Eph 2:7  That in the ages to come he might shew the exceeding riches of his grace in his kindness toward us through Christ Jesus. 
Eph 2:8  For by grace are ye saved through faith; and that not of yourselves: it is the gift of God: 
Eph 2:9  Not of works, lest any man should boast. 
Eph 2:10  For we are his workmanship, created in Christ Jesus unto good works, which God hath before ordained that we should walk in them. 
 
Christianity is the only religion that has a living, risen Savior.   Jesus came to earth at the exact perfect timing that God set in eternity when it was determined what each of the three parts of the Godhead would play in Salvation.  The Holy Spirit would bring men and women to the point of conviction and draw them to the Father.  And Jesus was the true lamb of God who would come and live a sinless life and pay the blood sacrifice required for the forgiveness of sin.

Jesus lead a perfect, sinless life, and paid the sin debt there on Calvary.  He was buried in a borrowed tomb, and after 3 days and 3 nights he arose from the grave.

When Adam, the first man sinned there in the garden of Eden, that depraved nature was passed down to every man and woman.   Only the perfect sacrifice could pay the penalty of sin.   We can’t live good enough to get to Heaven, but because of the Perfect Gift given to man by God, we can find salvation in the name of Jesus Christ.

John 3:16  For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life. 
John 3:17  For God sent not his Son into the world to condemn the world; but that the world through him might be saved. 
John 3:18  He that believeth on him is not condemned: but he that believeth not is condemned already, because he hath not believed in the name of the only begotten Son of God. 

So as we enjoy this Holiday Season, give the honor and glory to God and seek Christ for salvation if you have never been saved.   To enter heaven, we must be born again.   Jesus explained all of that in John Chapter 3:1-10.
 
       We have Many Spiritual Blessings and Gifts in Christ

Eph 1:3  Blessed be the God and Father of our Lord Jesus Christ, who hath blessed us with all spiritual blessings in heavenly places in Christ: 
Eph 1:4  According as he hath chosen us in him before the foundation of the world, that we should be holy and without blame before him in love: 
Eph 1:5  Having predestinated us unto the adoption of children by Jesus Christ to himself, according to the good pleasure of his will, 
Eph 1:6  To the praise of the glory of his grace, wherein he hath made us accepted in the beloved. 
Eph 1:7  In whom we have redemption through his blood, the forgiveness of sins, according to the riches of his grace; 
Eph 1:8  Wherein he hath abounded toward us in all wisdom and prudence; 
Eph 1:9  Having made known unto us the mystery of his will, according to his good pleasure which he hath purposed in himself: 
Eph 1:10  That in the dispensation of the fulness of times he might gather together in one all things in Christ, both which are in heaven, and which are on earth; even in him: 
Eph 1:11  In whom also we have obtained an inheritance, being predestinated according to the purpose of him who worketh all things after the counsel of his own will: 
Eph 1:12  That we should be to the praise of his glory, who first trusted in Christ. 
Eph 1:13  In whom ye also trusted, after that ye heard the word of truth, the gospel of your salvation: in whom also after that ye believed, ye were sealed with that holy Spirit of promise, 
Eph 1:14  Which is the earnest of our inheritance until the redemption of the purchased possession, unto the praise of his glory. 
 
I pray that you have a wonderful Christmas season, and if you have not received the greatest gift ever given, that you might seek salvation through Jesus Christ.     Have a Merry Christmas and a prosperous New Year!
 
Joshua Becker sent me this great story written by Jessalyn Jones about the 5 important lessons she learned from being a minimalist.
Check it out:   Minimalist Lifestyle Taught Me 5 Important Life Lessons
 
 

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Myths in Stock Market Advice – Part 1

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

Those of you who have been following my blog and articles for several months, know my reason for doing this is to share some of my findings in investing in the stock market.  I want to help everyone to make good solid decisions when it comes to investing, and my first 40 articles have been tied to things that have worked for me or promising new things I am trying this year.   The reality of the situation is that I can only share what I know to be the truth.    

I have been investing in the stock market for over 30 years.  I believe 2022 has been the most challenging year in my life trying to make sense of what is happening in the market. I have written several articles about the market and whether it was wise to continue to invest currently.  The article about dealing defensively with a  Bear market is:

https://lifecanbesimple.net/blog/defense-for-a-bear-market

Should we continue to invest currently:

https://lifecanbesimple.net/blog/should-we-keep-investing-now

The one thing I encourage everyone to do is to read and study.  Due to all the ups and downs and the market not behaving like prior years, I have probably learned more in 2022 than in any year of my life.    But the main reason I have learned so much is that I have learned about so many things that DON’T WORK anymore.  Also, I have read many, many investment articles and the 73 books that I have completed thus far in 2022.

By applying the defensive strategies I mentioned in my earlier article, we have been able to finally show a profit in 4 out of 5 of our Roth IRAs.   The S&P 500 is still down over 20% for the year. Considering how most of my IRAs were down over 10%, showing a 6.8% up at Schwab and 8.6% up at Vanguard testifies that the plan is working.   

Of the five accounts we have, these 2 are the ones with the most Dividend Growth Stocks and Dividend Growth ETFs.  Time will tell how effective this plan is going to be.  It takes several years of up and down markets to prove your strategies.  But in the process of evolving with the market,  I have learned a lot of things.    I want to share many of the things I know to be myths or outright lies.   This will be the first of many articles about various Myths I have discovered.
 
MYTHS IN STOCK MARKET ADVICE

Too many assumptions are being applied to the market using ‘Historical data’ to prove things will be ok.   This month, I have been reading 3 books that have opened my eyes to many, many false assumptions that people are taking as fact in Stock Market advice.   Some of the myths are spoken by so many people for so long that I have accepted some of them to be the truth.

In the next few investment articles (perhaps the next 4 to 10), I will start explaining all the false things that are being put forth as truth that are clearly lies.  I want to upfront recommend you read these next 3 books which have helped me identify some of the false things being taught today.

The first book is “I Will Teach You to Be Rich” by Ramit Sethi.   This book not only teaches about the false things being promoted as truth, but he gives great advice on how to manage your money and how to put your investments into ‘automatic mode.’

The second one is by a Certified Financial Planner who worked for one of the larger investment companies.  He has made me realize so many errors in my investment beliefs.  This book's name is:  “Stop Investing Like They Tell You” by Stephen Spicer.

I read this third one a long time ago, and it is not tied to just the lies being put forth, but it does cover several.   The name of this book is  “A Random Walk Down Wall Street” by Burton Malkiel.

These upcoming articles on Myths in Stock Market Advice will rely heavily on the findings of the first two books, some on the third book, and many things I have learned on my own over this past year.

One of the reasons that people make bad decisions in the stock market is due to FOMO and Herd Mentality.   FOMO means the Fear of Missing Out.   I wrote a whole article on how many people are so wrapped up in the Fear of Missing Out.

https://lifecanbesimple.net/blog/jomo-versus-fomo

People think that the stock market is easy money.   And Herd Mentality says that if everyone else is doing it, I must get involved too.   Don’t worry about whether it makes sense.  Just take the first bit of advice you hear and buy it.   This is very very wrong.   Every decision we make must be based on facts and part of a determined plan.   Just because someone says something is a good buy, we should not rush out and purchase it without considerable study.

Sometimes the media is responsible for being vague if not misleading.  Ramit Sethi mentions in his book that the media has accurately predicted 27 of the last 2 recessions.  *smile*   Don’t believe everything you hear or read.

This next myth has had me and many others believe a lie.  Even Dave Ramsey, the noted Radio Financial Advisor, and author has put forth this as fact also.   Have you not heard that just continue to invest no matter what the market is doing, as the S&P 500 has gone up an average of 12% for the last 50 years?    Well, that makes it sound pretty good does it not?   I mean if you have a 12% down, then you must be headed for a 13% up next year.    Sounds good, but it is not factual.   The only way this works is IF history repeats itself the same for 50 years, and you can leave your money alone for 50 years, then you should get an average of 12% for the 50 years.

What is wrong with this picture?  

1.  History does not repeat itself exactly.
2.  Most of us will hold investments from 5 to 20 years before selling them, not 50 years.
3. As you approach retirement, you can not stand a big loss.  The reality is that you could be facing 5 years in a row with a loss.
4. Several 4-year spans had a loss of an average of 3% on the S&P 500.
5. If you break it into 15-year increments (S&P 500 over last 50 years, you will find that those 15-year increments did not even average 8% per year.  7.7% was the average.)

So with all this false information, we need to adjust our thinking.   Clearly, this makes a huge difference in how we should invest.

Warren Buffet said that in the Stock Market, the Number 1 rule is to never lose any money.   And Rule Number 2 is to never forget Rule Number 1.

This new rule is going to be my main focus.   In our second installation on Myths, we will cover how a 25% loss is never regained by a 25% up in the market.   Your dollar basis is now smaller, so it takes up to a 50% increase to offset that 25% loss.   How many times have you ever had a return above 20% in the market?  I think perhaps I have had it happen 2 times in 30 years.    So we need to preserve our money most of all.

With this new knowledge, how good does that 9.62% we got out of those earlier I-Bonds we bought in early 2022?  The I-Bond has dropped to 6.77%, but that is still a great return.  I am purchasing more of those every week.  Read about I-Bonds at:

https://lifecanbesimple.net/blog/best-investment-for-end-of-2022

So to preserve our capital, we need to use our brains.  I am reading a book co-written by Zig Ziglar’s son John Ziglar.  It is on Hoopla Digital to read for free.  The name of it is “Master Successful Personal Habits”.

John says that Zig Ziglar used to say that every day of the year, some people are investing wisely and making good money while others are going broke.   It is truly in the mindset and knowing WHAT we are doing.    You can’t change everything, but we can change ourselves.  What goes on between your ears is what makes all the difference.

According to Zig Ziglar, many people suffer from POLM Disease.   POLM stands for:

P – Poor
L – Little
O – Ole
M – Me

Are you suffering from a PLOM pity party?    The key to success is to learn from our mistakes and errors.  Many have pity parties but never address their failures.

75% of the top 300 World Leaders in the past century were either raised in poverty or have had a serious Physical Deformity.   This did not hold these leaders back.
It’s not what happens to you it is how you handle things that makes the difference.
There is no limit on what you can do internally when you set your mind to it.    But it takes effort to study and learn.

We need to stop believing myths and being fooled by marketing strategies.  There is a pyramid scheme that effectively gets people to keep buying more and more making the greater fool of the latest purchasers.   Just because someone else made a huge amount of money on Amazon in the early years does not mean it will work at its inflated price today.

A Few More Myths:

Putnam investments studied the S&P 500.  Every 15 years, it has averaged only 7.7% overall, not the current proposed rate of 10 to 12% which most people claim.

Many financial experts sometimes, many times, promote stocks in companies that have poor performance.  In the book “The Smartest Investment Book You Will Ever Read”, Daniel Solon points out that financial predicting organizations like Morningstar continue to give thumbs up on ratings to companies that crater and file bankruptcy.
​
47 of 50 advisory firms continued to advise investors to “buy” or “hold”  companies right up to their filing for bankruptcy.  12 of 19 still predicted to buy those companies while in bankruptcy.

So who can you listen to?   It is not mainstream media or people selling investment advice.   In our next article, I will tell you how so many experts are accurately predicting the next big stock.   It will shock you how easily the public is tricked.

So take my findings and learn to make better decisions.  Keep reading and studying on your own.   If you are a serious investor, be sure to read those 3 books I mentioned.  
  
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The Soul of A Team – Tony Dungy

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

 The Soul Of A Team by Tony Dungy is a book about teamwork.  If you are a football fan, you probably are familiar with Coach Dungy.  He was a player in the 70s on the great Pittsburgh Steelers teams coached by Chuck Noll that won 4 Super Bowls in 4 appearances.  He later played for the San Francisco 49ers also.  He began his coaching career at Pittsburgh, followed by stints in Kansas City, Minnesota, Tampa Bay, and finally Indianapolis.    His Indianapolis Colts won the Super Bowl in 2007.

Currently Tony Dungy is an author and a broadcast analyst for NBC Sunday Night Football.  This book of course centers around football and what it takes to win in a competitive environment.   But the rules that govern how to win in football are true for businesses,  churches, and even in your personal life.   Some super concepts are presented in this book.
 
WHAT I LEARNED FROM THE SOUL OF A TEAM

It takes organized teamwork to be great.  Coach Dungy has seen a lot of great things in his career.  Selfless acts of courage, compassion, and moments of kindness.  Working in harmony with so many people with faith and integrity allowed Tony and those he worked with to change their worlds in the process.

The number 1 thing to be successful in life is to have great teamwork.  People who think they can do it all on their own find out that they truly need others.  Coach Dungy’s faith in the Lord is exemplified throughout the book.  As I read this book, it showed clear similarities to Winners Never Cheat by Jon M. Huntsman.    You can read my review of that book at:

https://lifecanbesimple.net/blog/book-review-winners-never-cheat-jon-m-huntsman

Coach Dungy points out that talent alone is not enough.  Talent can only take you so far, and without teamwork, you will not be successful for an extended period of time.  It takes faith, attitude, and hard work to rise to the top.  Teamwork is what will keep you going in the right direction to accomplish greater goals.

Tony Dungy shows in the book that people with great talent may excel for a time, but it takes teamwork to reach the top and remain there.

Examples of this were given in the book including John Wooten, the great UCLA Basketball coach, Coach Chuck Noll, Pittsburgh Steelers coach, and Bill Belichick, New England Patriots coach who has taken 7 teams to the Super Bowl.

The main story in the book is about the imaginary NFL team of the Orlando Raptors and the trials and problems they faced.   I will not deal with much of the detail about that but will leave that story for your reading enjoyment. 

In summary, the team was in its third year of existence and had never made the playoffs.  The owner was ready to throw out the whole coaching staff, management, and team members and totally start over.  

Coaches, players, and management were truly at odds with one another and were not on the same page with teamwork goals.  The owner was even considering moving the team from Orlando to Los Angeles which put him at odds with the community.

The head coach, offensive coordinator, defensive coordinator, and special teams coach all had their own goals unique to their units.  Even the General Manager was conflicted and not on board with a team concept.  In the book, Coach Dungy is hired to come in and assess things as a consultant.   It is very entertaining and eye-opening.

He gets the coaches, players, owner, and management on the same page by explaining that no team can be successful unless it has SOUL.

SOUL is an acronym that means the following:

S stands for Selflessness – putting your own individual goals aside for the sake of the team.

​O stands for ownership.   You take ownership of your actions.  Everyone’s role is significant.

U stands for unity.   To have any chance of winning, everyone must work with a united philosophy with everyone working toward the same goals.

L stands for having a Larger purpose.   Doing more than just leaving a Legacy, but doing something larger than just winning games.   Building a team for the future and the fans.   That way everyone wins.

The whole book revolves around the SOUL of the team.   So many issues came up, but each time, Coach Dungy turned them back to one of the 4 parts making up the SOUL of the team.
The book closes by asking a lot of questions helping you to seek your own personal “soul”.  So these teachings can go for finding the Soul of a team, but it can be about your business or even your personal life.

Would I recommend this book?   ABSOLUTELY.   It is an encouragement to anyone seeking to accomplish success in their business or their lives.    If you read this book and you will be blessed.   Surprisingly, Tony Dungy has several books that he has written.   I believe all of them can be found for free on Hoopla Digital.   

Read the following article about how to read books inexpensively.
https://lifecanbesimple.net/blog/minimalism-how-to-save-money-reading-books
 
 
 
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FAILURE DUE TO LACK OF PLANNING

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

When it comes to investing, there is no substitute for having a clear and concise plan.  A plan followed by actionable steps leads to success.  In life, we have so many reasons to delay our starting to invest.  We may think that we simply do not have any extra money to invest.  There are always unexpected expenses that will give you an excuse to wait until next week or next month.   Thinking like this is a sure way to never get started.

“He who fails to plan is planning to fail” according to Winston Churchill.

Even a minimal plan with minor amounts of savings is a plan to get off to a good start.  The number one regret I hear from investors is that they wish they had started investing sooner.   I know that is true in my own life.    I started investing in my 20’s but failed to be consistent year after year.  And  then life happened.   We raised three kids, and it wasn’t until I was in my 50’s that I got a serious plan of action in place.   Since then, I have consistently invested monthly.

In his book Personal Finance, Matthew Collins states that “A plan without action is just a dream.”  Action is required on your part.   And your first action is to get started.   Maybe just $10 a month, but start and be consistent.    Once you see some returns, you will find a way to increase your investing amount.

Investing is not all easy.  Andrew Carnegie once said “Anything worth having in life is worth working for. “

So we must make up our minds to get started, and then come up with a reasonable Investment Plan.  I can not over emphasize the importance of starting now while you are young.

The book I am currently reading is “I Will Make You Rich” by Ramit Sethi.  In his book, he gives an excellent example of two people, one who started at age 35 and the other who started at age 45.

Smart Sally sets up an investment account with $200 a month and only invests for 10 years.    Dumb Dan waits until he is 45, and he puts in $200 a month for 20 years.   Who has the most money based on a conservative return of 8% at the age of 65?

Smart Sally, having only 10 years of monthly investments has $181,469.

Dumb Dan invests $200 a month for 20 years, but because he started late, his balance at age 65 is only $118,589.   He invested twice as long, but is $60,000 less because he started late.   Think the huge difference if the monthly amounts had been $500 monthly which anyone with a yearly income of $30,000 or more could afford with a little discipline.

Now starting late is better than never, but see my point.   START NOW.    Time is on your side when you invest when you are young.   Time is not on your side after you pass the age of 50.   

Don’t let me hold you back if you are over 50.   It is much, much better to get started now than to never start.

In this Ramit Sethi book, he goes over dozens of excuses why people do not invest.   Many have to do with the claim they don’t have the money, or it is someone else’s fault.    It is not someone else’s problem.  

Ramit Sethi lists several counter cultural excuses:
​
LOL!  Invest?  I can’t even save enough for a pizza.
Maybe if baby boomers hadn’t ruined it for all of us..
I have social anxiety so I can’t do that.
You know who’s the real victim here?    

Me. I’m offended at you being offended.  And at the stupidity of this entire victim culture.

I refuse to play into the theatrics of how you can’t afford to save even $20 a month.    We play the cards we’re dealt.  I believe in focusing on what I can control.
 
I love Ramit’s in your face approach.    So many today blame someone else when the issue is really ourselves.  It is your problem.   As Dave Ramsey has said over and over, the main problem is the guy in the mirror.    Knowing what to do is 20% of the equation, doing it is the 80%.
 
Once you get started, it will be easier.    I know.    It was hard for me to get disciplined and consistent.   We are creatures of habit.  I will close this article with a little poem I read.
 
Sow an act and you
Reap a habit.
Sow a habit and you
Reap a character.
Sow a Character and
You reap a destiny.
  
 
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Winners Never Cheat by Jon M. Huntsman

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 
 
Winners Never Cheat By Jon M. Huntman is a great great book.  I am still so happy this one was recommended to me by Patrick Bet-David.    If you think old style morals and living a principled life is no longer happening, you definitely need to read this book.   Winners Never Cheat is a super book in regards to business success, and I would rate this the best book I have read on business success.   For years I have lived a principled life and God has greatly blessed me.   The Huntsman Brothers are proof again that great things await those that live right.

This book is the 68th book I have read in the year 2022.  I started reading only about investments, then branched out into business success.   This led me to study about Mindset and Habits.   All of these things interweave together in life.   To be successful in business (or life) requires discipline and the right mindset.  Jon M. Huntsman ws trained as a child to have great discipline.

Personally, I had never heard of Jon Huntsman before reading this book.    It was recommended in the book Your Next Five Moves which I reviewed below:
https://lifecanbesimple.net/blog/your-next-five-moves-by-patrick-bet-david

WHAT I LEARNED FROM WINNERS NEVER CHEAT.

Jon Huntsman and his brother started Huntsman Chemicals in 1970 as a  family run business.   The company has grown and evolved into a 2 billion dollar a year revenue successful corporation.

Huntsman Chemicals have made many products including the first plastic egg container, plastic forks and spoons, and the original Big Mac container.

Through the years, they have worked dozens of business deals ranging into hundreds of millions of dollars using a simple handshake to close the deal.  They consider the Huntsman Cancer Institute as one of their greatest philanthropic accomplishments.   Jon Huntsman believes one day that they will find a cure for cancer.  Many of Jon’s family members died of cancer, and he has overcome 3 bouts of cancer in his life.

This book is much more than a story about running a business successfully.  The original book was published in 2004 but this revision was published in 2007 when the housing crisis and other issues seemed to make traditional values no longer in vogue.

The Huntsman Brothers believe to reap an abundant harvest can only be done by being responsible, never cheating, or using any fraudulent behavior.   Jon Huntsman states that more is learned in times of adversity than in good times.

​Prosperous times never mean that a person will continue to do right.  

Whatever our lot, we must have a fixed code of ethics to adhere to in both good and bad times.  Always stand upright regardless of the consequences. They believe all we really need to be successful we learned as children in the sandbox.   Fair play and being kind one to another is what life is all about.   Treating others with respect and making decisions without having a room full of lawyers looking for contract loopholes.   Always be honest and stay far from greed or dishonesty.

No matter our background, each of us really knows in our hearts what is right and what is wrong.  There is no place in business (or in our personal lives) to look for gray areas that the lawyers live to promote.
 
Huntsman Business Standards Tests

1. Do what you’re supposed to when you are told to do it
2. Kindness and honesty determine your heart and character.
3. Never tell lies.
4. Treat others as your desire to be treated (The Golden Rule)
5. Play by the rules
6. Respect others.

 
Character is most determined by a person’s integrity and courage.   Your reputation is how others perceive you.  Character is how you act when no one is watching.

Jon Huntsman makes a point to never lie or mislead in business negotiations.  He is a tough negotiator, which is fine, but do the business deals honestly and above board.   Keep both hands on the table with your sleeves rolled up.

Three R’s of Leadership

1. Risk – You must take risks to grow.
2. Responsibility – If worth doing, do it right.   Be honest and humble.
3. Reliability – Above all things, do what you say.  Your word should always be your bond.  Use determination and courage to accomplish all things.

He quotes Andrew Jackson who once said:  One man with courage makes a majority.

No matter what, always keep your word.   To do this takes great resolve.

In selecting advisors, be extra cautious.  Be sure they share your core values and are not wrapped up in acquiring wealth.   Money should never be your main focus.   Be sure in tough times that your advisors will default to higher ground when in times of stress.
 
Show graciousness to competitors, customers, and employees.  Showing respect never goes out of style.   Whatever successes we receive in life we should give back.   Jon Huntsman received a scholarship to go to Wharton College of Business.  This gave him his start, and since gaining success, he has given hundreds of scholarships to deserving young men and women.      He believes in philanthropy so much that when the business has been slow, he has borrowed money to continue to fund his charitable giving.    When you make a promise, don’t break it is his philosophy.

Take your values to work and never allow a conflict between making a profit and adhering to your life principles of decency and fairness.

At the end of the book, he lists some F’s to practice and put first.
Family
Faith
Fortitude
Fairness
Fidelity
Friendship.
 
On the wall of his friend and doctor John Andrew Holmes is a plaque.  It says:   No exercise is better for the the human heart than reaching down and lifting up another.

The Huntsman Brothers have lived a life of reaching down and helping people all around the world.
 
Is this book worth reading?   For sure it is.   One of the best books on business and life I have ever read.  It will really inspire you to live a life of character and to never compromise your core values.   Winners Never Cheat.
  
 
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Total Money Makeover By Dave Ramsey
 

3 years ago, my wife and I took a course on getting out of debt at one of our Credit Unions, and then followed his 7 Baby Steps to Debt Freedom.   We were free of credit card debt in about 14 months.      His plan works for everyone, and I needed his cold turkey approach to get debt free.   If you have issues controlling debt, I recommend you follow his simple easy-to-follow steps.  

The first two steps are super simple.   Put $1000 in an easy to get to Emergency Fund (like a Savings or High Yield Checking Account).   Then you use the debt snowball to pay off all your non-mortgage debt such as credit cards, car loans, student loans, etc.

Dave Ramsey is a proponent of never using credit cards.   And I have no issue if you wish to use his method.   His method is safe.   You eventually over time put six months of salary into your emergency fund and never use anything but cash to pay for your items.    He has no issue using Debit Cards.
 
If you can say yes to these next questions, it could be that you can live easily without using credit cards.

1. I have no debt including no Mortgage Debt
2. I have enough money in my checking account to pay two months of bills.
3. I have Six Months of salary/income in my Emergency Fund

 
If you can say YES to all three of those questions, I would just rock on without any credit card use.   Why borrow and take a chance on developing a bad habit?   Because I misused credit in my younger years, my wife and I have a rule.  If we ever fail to pay off every credit card in full each month, then we stop using them.   If you pay them off monthly, you pay Zero interest for the whole year.

If you are not in the heavenly mode listed with three yes answers, you probably are like 90% of Americans.    It Is crucial to not try and do my credit card recommendations until you get rid of all non-mortgage debt.    Read Dave Ramsey’s book and follow his rules.  I tried for 7 years to get debt free and failed.  Once I went to his plan, we were out in 14 months and have since paid off our home mortgage.  It is the best feeling ever to know you own your own home.

So if you are debt free or in a good position to pay off any credit card debt each month, I am going to give you a few cards with the pros/cons of each one.  I have used all of these and most are still open today.

Discover Rewards 
PROS: 

1. Probably not a better card out there for 2 purposes.   One is to get huge cash-back rewards, particularly for the first year.    They match your 5% cash back on the first year, so you net out 10%.      
2. The second purpose is to use them to refinance other debts.   Typically you can go out for 15 to 18 months with zero interest for a 3% balance transfer fee.   I used this to help me get out of credit card debt.   Never pay that 18 to 23% interest.   You will never get out of debt by paying that kind of interest.  Because our FICO score is nearly at the top, I recently was given an option to only pay 2% on balance transfer fees, which is the lowest I have ever heard of.
3. Typically, you will receive a high credit limit of over $5,000.

CONS: 

1. You do not get to choose your categories to get the 5% rewards.   Discover changes in what is available each quarter.
2. You must sign up for the rewards.    If Walmart and Target are their quarterly 5% category, then you won’t get anything unless you first sign up for the cash-back rewards.
3. Takes a pretty good credit score to qualify.

 
Citibank Custom Cash Rewards
PROS:

1. Best cash back for some categories such as Gas and Dining out.   You choose the one category you want, and they give you 5% cash back which can be used to pay off the balance on your account.
2. For several categories, you can choose to set the 5% and this can be changed periodically.   I have never changed as I got mine for Dining, and it has paid accurately every month.  
3. Higher than normal credit limits.   ($7000 to $9000 if good credit rating)
4. 1% cash back on all other categories.
5. Occasionally they offer an extra $150 reward if you use it for $1500 in the first 3 months.

CONS:

1. They claim you can get 5% on food, but it excludes Walmart and Target.  We got two cards one for me for dining and one for my wife for food.  Never got more than 1% back on food and I called and they explained the exceptions.
2.  None of that is mentioned in the paperwork.
3.  Requires high Fico score.

 
FIDELITY REWARDS
PROS:

1. If you have a Fidelity Investment account such as a ROTH IRA, be sure to apply for this card.
2. Pays 2% cash back on EVERYTHING.   Nothing to sign up for, and no rules or exclusions.
3. Sometimes offers Interest-Free loans/balance transfers for a 3% balance transfer fee.   We used this to cover an $18,000 medical cost for my wife's surgery which was paid back by our insurance company later.
4. High credit limit.   We have a high credit rating, and our limit has always been above $19,000
5. Rewards can be directed right into your ROTH IRA if you so desire.

CONS:

1.  None I can think of.   If could only have two cards, it would be this one and my Sam’s card.

 
SAMS CLUB PLUS MEMBER
PROS:

1.  Can be used to buy Samsclub.com items online with 5% back.
2.  All Fuel purchases are 5% back.   Occasionally they double the rewards for a week or two.
3. All Dining is 3% back.
4. All Sam’s purchases are 2% or more back.
5. All others are 1%.
6. Money is now paid monthly rather than once a year as in past.

CONS:

1.  I would like to see them offer 5% off on in-club purchases, but this is not a negative.   Just a desire of mine.
2. You must pay a yearly Sam’s fee for PLUS which is around $100.   They are running a special now for $45 I understand for first-time members.

 
AMAZON STORE CARD
PROS:

1.  5% back on everything on Amazon
2. Free next-day shipping on most items.
3. If you use METROPCS as your cell phone carrier, they pay your prime membership fees. (Not sure this is still offered)

CONS:

1.  Requires PRIME membership.   This went up from $119 to $139 this year.
2.  Not a real Visa or Mastercard… just for Amazon purchases.

 
PENFED CREDIT UNION PLATINUM REWARDS
PROS:

1. Best for buying in-store groceries at Walmart or Target.  3% on all grocery charges.
2. I believe 3% back on all dining also.   Verify this.
3. Pay $150 rewards if you purchase $1500 in the first 3 months.    We did it in the first month and they immediately paid the rewards.

​CONS:

1. Cashback rewards are not payable to your bill.
2. You may have to be an AMAC member to get this card.  (Similar to AARP)
3. Rewards must be placed on gift cards that you choose.  Gift cards take 5 to 7 days to be delivered by mail.
4. Rewards are pro-rated, not dollar for dollar.  So to get back 2500 cashback points rewards ($25) requires 2680 to 2940 points.  This means your net discount to Walmart drops from 3% to 2.8 or 2.55%
5. You must use their vendors which vary in rewards charges.   I got $50 on an IHOP card today for 5660 points.  
6. I just called PenFed and got clarity on how the rewards work.   I found that while currently all the reward points are above the 1-1 reward rate, sometimes IHOP, SUBWAY, and AMAZON actually go below the dollar for dollar. In other words at one time, they were giving $25 of rewards for 2120 of your 2500 points.   This makes your percentage of savings higher than 3%.  And the Visa card can be used anywhere, and no extra VISA charges.
7. I also found out that you can select to receive your rewards directly.  You can download them to your phone after less than 3 hours after request.  You can have it sent directly as a message and the QR Code can be read by the company you requested.  I will test this out tomorrow.

WALMART VISA
PROS:

1. 5% back on online purchases
2. 2%  back on all in-store purchases
3. 1% on other purchases
4. 5% on Fuel purchases at Murphy USA

CONS:

1. Not many.    Most credit limits are low like $1,000

 
I have not researched the new WALMART Plus card, but I understand that it may pay up to 10% cash back on fuel.   Again, to get it requires a yearly charge of like $85.  It does include free grocery delivery I believe.

I hope this gives you an idea of what is available in the Credit Card market.   I will close with a reminder from Dave Ramsey who said “I have never met a millionaire who got rich off Discover or Visa cashback points.”  

Good thought to consider.    I pay these cards off every month and only use them to purchase what are our basic needs for the month.   Don’t ever carry credit card balances with high-interest rates.   If you are having trouble with credit, ignore all the credit card recommendations and read Dave Ramsey’s book listed above.   You can check it out for free at most libraries.
Total Money Makeover By Dave Ramsey
 
 
 
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