Alan Frisher, owner and CEO of Sage Financial Management in Suntree, answered questions for Viera Voice that could help novice investors of any age.
Is there a minimum age for investing in stocks?
Frisher — Most brokerage houses won’t allow an account to be opened unless you are at least 18 years of age. That is when our federal government considers you an adult.
How does it work with minors? Can they buy and sell without a parent?
Frisher — Anyone under 18 years must have a parent or legal guardian to buy and sell stocks for them. One strategy to consider for a parent or guardian is to open up a Roth IRA for their minor child. Money contributed on the minor’s behalf can be invested to grow tax-deferred until the “child” is 59.5 years of age. Any money withdrawn after that would be tax-free without penalties. You should consult with a financial professional before making any investment choices or strategy.
What should the person who has only $1,000 or less do to invest it and see it grow over a medium term?
Frisher — I would first suggest that anyone looking to invest seek out a consultation with a licensed financial advisor. Having only $1,000 to invest may be better used to pay off a high-interest credit card debt or a bank loan. Remember, investing has a certain amount of risk associated with it. Your risk tolerance is dependent upon numerous factors, including, but not limited to, age, time period and type of investment.
How much cash should a person have on hand and what should be invested?
Frisher — The general rule of thumb is to have between three to six months worth of expenses in the bank (emergency fund). The difference between three or six months has to do with the current stability of your employment. That said, even very stable jobs could have been adversely affected by COVID this past year. That being the case, I would recommend at least six months worth of expenses as an emergency fund.
Are there certain types of stocks or investments someone with only a small amount of cash should consider?
Frisher — Mutual funds and/or ETF (Exchange Traded Funds) are diversified investments based on sectors (financial, energy, technology) or capitalization (large companies, small companies, dividend-producing companies). Typically, these types of investments are safer because it is not just one company, but many different companies within the fund. Also, large company (blue chip) individual stocks tend to be stable and can realize substantial gains over time. Again, speak to a professional before making any investment decisions.
What changes can we expect to see in the stock market now that Congress is looking at hearings regarding the GameStop situation?
Frisher — Every now and again, an odd situation occurs in the marketplace where one particular sector or stock goes on an abnormal run. This recently happened with GameStop because many new retail customers were buying up shares based upon what was said by an investor on a particular website. While events like this occur, it really doesn’t have a long-term effect on the overall stock market. Currently, our economy is mostly affected by COVID. Once the vaccine takes hold and businesses return to the new normal, we expect to see our economy expand and gains occurring in the stock market. We can actually see the beginning of that happening even now.
What impact could this have, if any, on the long-term investor?
Frisher — Historically, the stock market has produced more wealth in any 10-year period than any other type of investment, including real estate and precious metals. Long-term investors know this and continue to realize substantial gains in the market over a 10-year or greater period of time. In addition, the liquidity (being able to buy and sell easily with quick returns on one’s money) of the stock market, continues to make it among the most widely used forms of investing.
What is the overall outlook of the stock market this year considering the optimism with the COVID vaccine, low interest rates and the possible falling value of the dollar?
Frisher — As previously discussed, many economists, analysts, and financial advisers like myself believe that we will see a positive market in 2021 and a growing economy thereafter. Certainly, anything can happen that is out of our control, but given current circumstances, we are heading in the right direction to get back on track for economic growth and prosperity.
Should everyone invest in the stock market?
Frisher — Investing is not for everyone. No one can predict with clear accuracy how the market will behave. Therefore, every investor has the ability to lose whatever he/she invests. That said, there are ways to minimize that risk of total loss and indicators that may provide positive results for those patient and sagacious investors. Understanding how to invest, before you invest, is paramount to obtaining beneficial results. Even savvy investors discuss options with professionals in the field. Before you invest, make certain you understand what you are investing in, and make certain you trust your financial adviser to give you the best advice for your specific situation.
Alan Frisher studied economics at Brooklyn College at the City University of New York earning a B.A. with honors. He is the owner and CEO of Sage Financial Management in Suntree. Frisher has been written about by USA Today, The New York Times, The Wall Street Journal, Sun Sentinel, Florida Today and other publications. He has appeared nationally on the Anderson Cooper news show on CNN, Fox TV, and many state and local news programs. Frisher is a licensed, registered representative with LPL Financial and holds Series 7, 66, Life and Health insurance licenses, and is a Certified Divorce Financial Analyst (CDFA™*).
Frisher can be reached by calling 321-242-7526 or at 321AHAPLAN.com.